What Is A Reverse Mortgage? (Part 5)
A 12 Part Series
Part 5 - Reverse Mortgages, Income and Taxes
Effects on Income
A reverse mortgage is a loan against your home, not income. Therefore, the funds received are not subject to income tax and do not affect Social Security benefits. The IRS does not consider the proceeds from a reverse mortgage to be taxable income. In addition, reverse mortgages have no income restrictions.
Tax Deductions
The interest paid on a reverse mortgage is tax deductible. However, the tax deduction can only be claimed in the year in which the interest is repaid. As a result, the size of the potential tax deduction builds up until the year when the reverse mortgage is repaid by the homeowner or their estate.
Payment of Property Taxes
A reverse mortgage does not affect on the homeowner's obligations to stay current on property taxes, homeowner's insurance, etc. Consequently, the homeowner must continue to pay these costs separately.
Next: Part 6 - Outliving the Reverse Mortgage
Part 1 - Definition of a Reverse Mortgage
Part 2 - Reverse Mortgage Eligibility Requirements
Part 3 - Myths and Frequently Asked Questions of Reverse Mortgages
Part 4 - Pros and Cons of a Reverse Mortgage
If you're 62 or older and are looking for money to finance a home improvement, pay off your current mortgage, supplement your retirement income, to pay for healthcare expenses, or even to buy your retirement home, then consider getting a reverse mortgage. Find out how a reverse mortgage can use the equity in your home to pay you.
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