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Reverse Mortgage Tax-Related Q&A - Ask ARLO™

Hello! I’m ARLO™, your personal guide to navigating the complexities of reverse mortgages, with a special focus on tax-related concerns.

Start by entering your question into the search box below to discover if we’ve already provided answers.  If your query remains unanswered, feel free to submit it—I’m here to provide you with comprehensive, personalized information!


So far 2264 of your questions answered by ARLO™
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Expert Answers You Can Trust!

ARLO™ is moderated by All Reverse Mortgage, Inc. CEO & industry expert Michael G. Branson, with over 45 years of experience in the mortgage banking industry.

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Answered By Our Experts

Question From Gloria L. on 9/03/2021
Can you get and discount on property taxes and insurance if you have a reverse mortgage?
Expert Answer

Hello Gloria,

I am not aware of a discount or a premium for having a reverse mortgage.  In fact, I really don’t believe that the type of financing you have on your property will help lower or would raise your taxes or insurance on the home. 

The type of financing on the home is not one of the factors used to determine the assessments for taxes or the risks for insurance.

Question From Greg on 7/20/2021
When does the reverse mortgage company report interest they earn each month to IRS?
Expert Answer

Hello Greg,

I am sorry but I am not sure what you are asking me.  Are you asking me about reporting of interest a borrower earns?  Because if you are talking about the credit line growth rate, the borrower is not earning interest.  That is an increase in funds being made available to the borrower and if they ever use the funds, the borrower will owe the money borrowed and would begin to accrue interest owed on those funds as an outstanding obligation. 

The borrower does not accrue interest on the outstanding line that is unused.  Funds remaining available to the borrower but not yet borrowed do not accrue interest owed.  If you are referring to the interest that the borrower pays on the loan, the borrower receives a monthly statement that indicates the amount of interest that accrued on the loan each period. 

Borrowers have the opportunity with a reverse mortgage to pay any amount at any time but are not required to repay the loan as long as they live in the property as their primary residence and do not experience any other events that would require the lender to call the loan due and payable (i.e. fail to live in the home as their primary residence, file to pay the taxes or homeowner’s insurance when due, etc.). 

I am not an accountant and cannot give you tax advice, but I do not believe you can deduct interest that accrues until you pay it.  In other words, if you allow the interest to accrue but make no interest payments, I do not believe you have anything to report to the IRS as you did not make any interest payments, but you would need to confirm that information with your tax accountant or tax attorney. 

Question From Uyent on 3/15/2021
My dad and I are on the house title. However, he has a mortgage on his name only. The house has good equity that he’d like to access to support him with expenses and travel. My siblings and I are looking to provide something like an intrafamily reverse mortgage. Is that possible? Should they be added to the title as well? How should we refinance or assume his mortgage? Appreciate any guidance.
Expert Answer

Hello Uyent,

You absolutely can do a reverse mortgage and keep it in the family.  How you set it up to secure yourselves and keep funds available (and how much) is entirely up to you. 

Since it will not be a government-insured loan (FHA), the rules are whatever you make them to be.  You can leave the existing loan in place and put a second loan behind it, or you can pay off his existing loan with your funds and make the family reverse mortgage be the loan in first lien position. 

Whether you can assume his loan is up to the exiting lender or whether they would call that loan due and payable if someone tried to assume the loan (which I suspect might be the case). 

Since this is not a question about a reverse mortgage so much as a legal question about what you can and cannot do with familial financing and what steps should be taken to protect the rights of all family members who are supplying funds, I would suggest that you contact an attorney and ask them to set up the legal foundation for the loan and payback provisions. 

The attorney would be the one to advise you because any provisions, especially with changing title could have possible property and income tax implications and while the loan is probably a great idea if this works for all family members, you should know everything before you make any moves. 

Question From Roy on 3/07/2021
If I owe income taxes, way past the statues of limitations can I get a reverse mortgage?
Expert Answer

Hello Roy,

The lender will not make the determination as to what debts or liens you are legally still obligated to pay based on different state statutes.  

If you do not want to pay debts showing on your credit or liens filed against your property, you should resolve those issues before you apply for the loan and have the creditor remove the negative information if those debts are no longer owed.

Question From Alfonso on 2/20/2021
If you lose your original contract. Is there any way to get a copy? Because the original company sold the contract to another company. And they are trying to change the agreement from the original company.
Expert Answer

Hello Alfonso,

The new servicer should still have the copies of all your loan documents and should be able to supply you with a complete copy of your legal documents. 

If your loan is the HUD HECM reverse mortgage, the documents are standard and may change based on when the loan was closed and HUD’s guidelines at the time, but the new lender may not change the terms after the loan has already closed. 

If you remember the title company or escrow company that handled the closing and it has not been too long ago, they may also still have a copy of your loan documents, but they are only required to maintain their records for 3 – 5 years depending on what the state laws stipulate. 

I would try the servicer first, there should not be a problem sending you a copy.

Question From K. Harker on 2/07/2021
My mom is 86 and had a reverse mortgage. She has been in memory care for almost 2 years. Her house went back to the RM company. The balance on the reverse mortgage loan was way more than the house was worth and it was not something any of us wanted to buy. Now in the mail my mom received a 1099-A. She does not file taxes and has not had enough income to do so in years. She gets SS and receives funds on the VA Aid and Attendance plan only for her caregiving, all her funds go to memory care. We were told by voluntarily vacating the house and letting it go back there would be no tax consequences. Why is she getting a 1099-A?
Expert Answer

This is one area that I really hate to hear people mischaracterize when they refer to reverse mortgage liability.  The reverse mortgage is a non-recourse loan, and you will not owe anything to the lender if you choose to walk away from the house at the end of the term. 

The IRS may not be as forgiving though.  I always counsel heirs and borrowers to contact their tax advisor and do not tell them that they will not have any tax consequences because I cannot possibly know that.  I am not an accountant, nor do I know their tax situation. 

I heard from one heir that they had no liability even with the 1099-A due to the fact that the borrower had no assets or taxable income, but I cannot say for sure that when heirs settle the estate if there are assets and income otherwise that there will be no taxes owed, I simply don’t know that. 

It’s not the family’s liability so if the borrower has no assets, I assume that is why the heir to whom I spoke was not concerned with any taxes payable, but I just do not know. 

A 1099-A form is required anytime someone abandons property against which the borrower withdrew loan funds and did not repay them ( 

Not being a tax professional, I do not know what steps borrowers and heirs must take to mitigate any taxes the IRS would charge in this instance, if any.  I would suggest that you contact your tax professional to obtain this information.

Question From William L. on 1/18/2020
In 2019, we paid off a reverse mortgage in full and then added my non borrowing spouse to a new reverse mortgage. She had not owned a home in last 8 years or so and we paid additional monies to get her name on new RM Title costs and property deed. Otherwise she would have been helpless at my death. She was 67 in 2019 and I was 80. What tax implications and hopefully tax benefits will be applicable. The prior RM was for $194,000 approx and new RM was for more than $200,000. Read where you are the expert and without patronizing you,, please help me find benefits here. Tax filing due Apr 15, 2020Thank you in advance.
Expert Answer

Hello William,

I would be happy to answer any questions you may have about the loan and what it will or will not do but when it comes to taxes or legal advice, not only do we not claim “expert” status but are required to answer by licensing law that we cannot provide tax or legal advice.  For these questions I must refer you to your financial/tax specialist.  

Question From Michelle on 5/08/2019
I just signed a quit claim deed on property I was named as 1 of the 6 trustees who also signed a quit claim deed (my father’s property) he is still alive and is trying to do a reverse mortgage but because I owe back income taxes it shows that there is a lien on any property I may be connected to so the real estate agent told my father he will have to pay my debt at closing have you ever come across this? Again, I did just sign the quitclaim dead.
Expert Answer

Hello Michelle,

Unfortunately, yes.  The IRS or any other creditors for that matter can place valid liens against you on any property on which you are an owner.  By filing a Quit Claim Deed after the date of the lien, I do not believe your lien is invalidated.  If that were the case, all property owners could simply eliminate all liens by Grant Deeding or Quit Claiming a property to another party and then selling the property before the creditor could refile the lien in any instance.

However, if the property was never really yours and always was your father’s, I would suggest that you contact an attorney to see if the property can be released from the lien.  I am not an attorney and cannot give you legal advice, but I think it is worth your time to talk to a legal expert in these matters to determine if the property can be released since it was not your property.  I don’t know what grounds those borrowers used to have the liens removed so it may be completely different and may not have any bearing as to your circumstances whatsoever, but I have seen the IRS release liens previously so it’s worth a try before you just make dad pay them.

Question From Linda R. on 3/03/2019
I was left my neighbor,s house. she had a reverse mortgage in it. I sold the house and paid off the mortgage. Can I deduct the interest on that loan for the year it took be to sell it on my taxes. It was 19%
Expert Answer

Hi Linda,

I’m sorry I cannot give you legal or accounting advice, we are not attorneys or accountants and our licensing forbids us to act as such.  This would be a question for a qualified tax professional.  I will tell you though that you are looking at the interest incorrectly.  The interest accrues on a reverse mortgage and is not paid until the loan is repaid so the loan did not accrue 19% interest in one year. 

 The interest on the loan became due and payable when the loan was repaid but that interest was accruing for the entire life of the loan.  I honestly can’t tell you what the accounting rules would be for interest paid that accrued over the life of the loan when you repaid the balance on a house that was given to you recently.  I have no idea if this would be a deduction, or possibly an offset to the gift amount that you must claim based on the gift of the house or what.  All great things to discuss with your accountant.

Question From Chris on 3/02/2019
Is the principal I owe the lender on a reverse mortgage taxable if I sell my home? Say it sells for $500,000; I owe the lender $100,000. do I pay taxes on $400,000 or $500,000 (exclude $250K deductible, and other expense for this example, please)?
Expert Answer

Hi Chris,

I’m sorry, I can’t answer this because I am not licensed to give tax advice and my license specifically forbids that I give tax or legal advice.  However, I do not believe an accountant could even give you an accurate answer based solely on this information. 

I think you would need to be able to tell him or her how much you paid for the home, any improvements you made to the home and interest paid, etc. not just the balance on the mortgage and I am not even sure what other information they will need.  That’s why it is always best to seek out the assistance of a qualified accountant or tax attorney for this type of question. 

Question From Karen G. on 2/20/2019
Parents died but had a living trust. only asset was a home which was under a reverse mortgage with a balance due of $956,000. the house sold for $1,205,000 and after paying off the realtor the trust received 156,000. How much taxes will be due?
Expert Answer

Hi Karen,

I am sorry, I am afraid I am not licensed to give tax advice.  You will need to consult with a tax professional such as a licensed CPA or tax attorney for this question.  Taxes are complex and it typically depends on many more circumstances other than just the amount the trust received in the end.  I would encourage you to seek competent representation as the difference in what you pay for a good tax professional as opposed to someone who can just fill out the forms may not be anywhere near what you save by having a sharp person who knows all the ways to avoid unnecessary taxes.

Question From Shane A. on 2/10/2019
My ex-husband did a reverse mortgage on our home after we divorced in 2011. He still lives there (he's 77) along with our adult daughter and her boyfriend. She wants to own the home so her bf and she can live there and start a family. Her father would still reside on the property, in a back guesthouse. When he did the RM, the home was appraised for $485K. Homes that are similar on our street are now selling for $890K+. What would our daughter have to pay to own the home? She thinks she'd only need to pay the RM the monthly mortgage payments they've paid since he did the RM back in 2011, NOT the entire value of the home at the time he did the RM; I believe she's mistaken and would at least have to get a $500K mortgage loan in order to own the home. Her fathers only had to pay $2K in property taxes on this home for decades; surely my daughter's taxes each year would be more, am I correct?
Expert Answer

Hello Shane,

The property is still owned by your ex-husband.  He doesn’t have to “buy it” from anyone.  He owes whatever balance he owes on the current loan and the equity is already his.  If he wants to allow his daughter to pay that loan off with a new loan so that there is no longer a reverse mortgage on the property, then he is free to do so and they do not have to pay any more than is owed, but that would be up to him.  I have no way of knowing what that balance is currently. 

If the home appraised at $485,000 in 2011, it would depend on whether he took the full amount available to him under the reverse mortgage program, if he has a line of credit he has not fully accessed or has been receiving payments but I would highly doubt his balance is up anywhere near $500,000 at this point under any scenario starting at those numbers. 

What she would have to pay to own the home would be whatever price he wants to sell it to her.  To retire the reverse mortgage is whatever the outstanding balance is, and that amount will show on his current statement.  Those two amounts do not have to be the same number.  About the taxes, I cannot really advise you here, but I would suggest that your daughter and ex-husband consult with a tax attorney. 

I would think that there may be a way to put the property in trust with dad still on title with your daughter at this point so that there is no change in title, thereby not creating a taxable event but I cannot tell you that for sure.  A competent tax professional would be able to tell you the best way to proceed to avoid a reassessment of the property at this time if that is possible.

Question From Kelley on 1/28/2019
My 88 year old father has had a reverse mortgage (HECM) on his condo since 2009. He has been in and out of the hospital, then in a board and care house for 8 mos. and now he's in a skilled nursing home for a bed sore that won't heal. He wants and hopes to return home someday. I'm not sure if this will be possible but I hope so. But given that it has been almost 1 year since he has not lived in his condo the loan will be due and payable soon (from what I read on the loan document). There is enough equity left in the condo for it to make sense for my husband and I to pay off his reverse mortgage. This will allow us to rent the property and get some cash flow to help pay for his nursing home expense. If we pay off his reverse mortgage loan with cash (through a title company) and share title as joint tenants will this prevent a capital gains tax for my Dad?
Expert Answer

Hi Kelley,

I wish I could help you with this question, but this is one you really need to discuss with your accountant or tax attorney.  We are not licensed to give tax or legal advice.  I think you are best to discuss with your tax professional at any rate because I think he/she can probably help you with a strategy to specifically avoid that issue.

Question From Donna D. on 12/16/2018
My friend has been in the hospital with bone cancer for 8 weeks! She cannot pay her taxes and lives in Florida. How long will it take for them to foreclose on her house? She is 1.5 years behind in taxes. Thanks.
Expert Answer

Hi Donna,

I am sorry to hear about your friend.  I cannot give you a straight answer to your question because there are several things the lender can do first before they would start a foreclosure.  The state has a tax lien sale it can go through to collect delinquent taxes, but the lender would not let it go that far.  If she has money still available in her line of credit, the lender can advance funds from the line of credit to pay taxes. 

In that instance, she would not be facing an immediate action.  If there are no funds remaining on her credit line, the lender may still advance funds to pay the taxes but would then call the loan due and payable and the amount of the funds they advanced would be added to the amount she owed. 

If the lender called the Note due and payable, they would give the borrower typically a time period in which to pay off the loan.  This should be about 30 days, but they also need time to get an appraisal on the property and it has been taking servicers much longer.  If the borrower does not pay off the loan after the lender obtains their appraisal and has called the Note due and payable, the lender could then begin by filing a foreclosure.  An uncontested foreclosure typically takes about 180 – 200 days from the time it is filed. 

The borrower also must be concerned with being out of the home for more than 12 months.  If she has been out for 2 months’ time, she has plenty of time to re-enter the home to meet the occupancy requirement, but she must keep the timeframe always in mind that if she stays out of the house for more than 12 months, the absence is no longer considered temporary and with a permanent absence, the lender can also call the Note due and payable. 

This could affect her even if she has money left on the line and they pay her taxes from her line of credit.  If she is still out of the home in 6 months and her return to the home begins to look doubtful, she should discuss plans with her family for disposition of the home so that a sale or refinance can be arranged before the lender pushes the issue and they are not ready.

Question From Frank S. on 11/07/2018
We have a reverse mortgage and paid insurance last year but are behind on the taxes for the year. Could we get a modification putting the taxes and insurance on lesa. We have terrible credit due to an accident. Please help!
Question From Brenda on 11/02/2018
I am heir to a property in New Jersey with a reverse mortgage. The owner has died. I decided to do a deed in lieu of which the mortgage company has accepted. I need to submit a request by them for a number on a W-9. Do I use my social security number or the TIN issued to the estate at time of probate?
Expert Answer

Hi Brenda,

I am afraid I can’t help you with this as this is a question for your CPA.  This is a tax issue and may have tax implications that you need to discuss with your tax professional.  This does not affect the reverse mortgage at all but may affect you from a tax or legal standpoint.  We are not licensed to give tax or legal advice and cannot do so by law so you really should contact a licensed professional who can help you with this question to determine the ramifications of doing it either way before you complete the form.

Question From Andy P. on 9/22/2018
Can you write off roof replacement if your house is reverse mortgaged?
Expert Answer

Hello Andy,

I’m not sure I understand the question, but your reverse mortgage is a loan just like any other.  If you are concerned about possible tax implications, you really should contact a tax professional.  I think you will find that if you could write it off without a reverse mortgage you still can but you really should find out about what expenses are and are not deductible directly from your tax professional.

Question From Mag on 8/18/2018
Why doesn't reverse mortgage accept my property tax payment agreement I have with my county?
Expert Answer

Good Morning,

Without knowing what your “agreement” is, I’m at a little bit of a disadvantage here but I think I can fill in the blanks well enough.  If I am off-base in my assumptions, then you may want to follow up with another question.  If your agreement is for any amount that allows for a deferral some or all of your annual taxes, HUD does not allow such an arrangement. 

If the agreement would be for lower taxes as in the case of a senior discount, a historic home tax reduction (i.e. Mills Act in California) or other such program that allows you to have a lower tax rate but when you do pay them you are paid in full, that is perfectly fine.

If the program you are referring to allows you to defer all or a portion of the taxes, HUD will not allow the participation in the program because if you default or pass and the lender has to take the property to repay the obligation, the taxes are liens that take priority over mortgages. In other words, any amounts that borrowers deferred, would now become the liability of the lender and subject to a claim submitted to HUD. 

These amounts could become quite high in areas where the taxes are higher.  HUD requires that borrowers keep all property charges current to obtain a reverse mortgage. Furthermore, the thought is that if a borrower is unable to pay the taxes and insurance and live comfortably, even with their reverse mortgage, it is very possible that the reverse mortgage is not the right loan and that borrowers should consider looking at other alternatives.

If you are contemplating a reverse mortgage and the tax deferral is still needed or the property does not make sense for you because you still aren’t living in the home comfortably with all obligations, HUD feels that you should consider other options before you start to use your equity only to find out later that you still need to make a move but then don’t have the equity and options you once had. 

Question From Lee on 8/01/2018
Does a reverse have interest income that triggers a 1099 to show up at tax time?
Expert Answer

Hello Lee,

The reverse mortgage does not issue you a 1099 for interest income because it does not pay you any interest income.  There is nothing to report, to the IRS or anyone else.  If you are referring to the growth in the credit line, that is not interest you earn.  The growth in the credit line is greater borrowing power that you get over time based on not using all the funds available to you right away.  It’s more like a person who has an increase in a line of credit or the credit limit on a credit card, it allows you access to more money but you didn’t earn anything and if you use the funds later, they are borrowed funds and you would begin accruing interest on them as soon as you do borrow them.

Think of the line in this manner.  All borrowers represent the same credit risk based on their age, property value or HUD lending limit whichever is less and the current interest rates.  If borrower “A” borrows all funds and begins accruing interest on the funds and borrower B does not touch the line of credit for 10 years, borrower B does not accrue interest on money that was not borrowed.  For HUD to make the risk equal for both borrowers even when one borrows the money right away and one does not, HUD allows the credit line to grow by an amount equal to the interest that is not accruing on the outstanding balance.  Therefore, borrower A and borrower B represent the same risk because borrower A is accruing interest and borrower B has the same access to the same amount of money in the way of an increased credit line. 

Borrower B can borrow the funds later if he/she chooses and the line of credit available will include the original line amount and all the interest he/she did not accrue in the form of credit line growth.  But since it is not “interest earned” and the borrower or the borrower’s estate will have to pay it back if they do borrow the funds (plus any interest that accrues on this amount), there is no 1099 due to the borrower and therefore none sent to the borrower as there was no income paid to the borrower, interest or otherwise.

Question From Barry on 7/14/2018
Is the interest paid deductible?
Expert Answer

Hi Barry,

This is a question I really have to defer to your licensed tax specialist.  The reason I can’t give you a straight answer is because the interest you pay on a reverse mortgage is just like the interest on any other loan which is also subject to “conditions” within the tax code.  For example, your income could affect deductibility, when you actually pay the interest would come into play, the limits for deducting interest based on loan amounts and all other tax laws.

I can’t give tax advice and I don’t know your circumstances well enough to begin to try.  The reverse mortgage is a loan just like any other loan that accrues interest but most people don’t actually pay the interest until the end of the term so you do need to speak with your tax specialist to determine how the tax laws and your situation would affect your deductions.

Question From Jo Gia on 7/08/2018
Can i still depreciate rental portion of home that i have a reverse mortgage on?
Expert Answer

Hi Jo,

We are not licensed to give tax and accounting advice.  You need to speak with a qualified tax professional but since the reverse mortgage is a loan and not a source of income, I think you will be glad you did.

Question From AJ on 7/08/2018
Will deferred property taxes impact ability to get reverse loan. Home paid for.
Expert Answer

Good Afternoon,

HUD requires that all taxes are paid current, not deferred, to obtain a reverse mortgage.  You must also continue to pay them and not defer them after you obtain a reverse mortgage or it is considered a default on the loan.

Question From Angela on 6/09/2018
If I got hurt in someone's home can I file an injury claim against there homeowners insurance if they did a reverse mortgage?
Expert Answer

Hi Angela,

I'm afraid you would need to ask an attorney about legal rights and remedies. 

Question From Austin on 5/19/2018
If I take out a reverse mortgage on my Condo, what are my insurance and tax obligations
Expert Answer

Hello Austin,

Your taxes and insurance probably won't change unless your current level of insurance is lower than required for the new loan. Otherwise, you still own the home and would still be responsible for paying the taxes and insurance.  You could look into a set aside where funds are set aside from the loan to pay these costs for you, but then the money comes from your loan proceeds so even though the lender physically makes the payment, they are doing so with your money. You don't accrue interest on the funds set aside until they actually use them to pay one of the payment and that's when they become borrowed funds.

Question From Michelle on 5/16/2018
Hi I want to know if I have a reverse mortgage do I still have to pay property taxes?
Expert Answer

Hello Michelle,

If you have a reverse mortgage, just as with any other loan, you still own the property and so you are responsible to pay your taxes and insurance and maintain the home in a reasonable manner.  The security agreement and legal documents are much the same in this regard as with any other type of home loan since you are not selling the house to anyone, you are only using your home as collateral for a loan.  If you decide to sell the home at any time, there is no prepayment penalty and you keep the equity in the home as well so it is to your benefit to keep the house maintained as well as the fact that it is more habitable.

Question From Beth on 5/08/2018
My mother is 90 and has a reverse mortgage and still lives in her house full time, she would like for me to move in with her and help take care of her and wants to pay me. Is this allowed, and if so, would she incur any penalties? Would I be required to claim this as income and pay taxes or would it just be a gift from her to me? Thank you.
Expert Answer

Hi Beth,

No problem with the reverse mortgage at all. As for any possible tax implications, you really need to speak with a qualified tax attorney or cpa for the answer the that question.

Question From Dilana G. on 3/11/2018
Will a reverse mortgage affect a low income status regarding property taxes?
Expert Answer

Hello Diana,

A reverse mortgage is not income and therefore is not reported as such, the money you receive is money you are borrowing against your home.  Borrowed funds do not change your “income status”.  Many programs do have qualifications that depend on limited assets though so you need to make sure that you check with a trusted advisor to review all the requirements of your individual program to make sure that you do not inadvertently exceed all the program allowances.  For example, if your program only allows you to have a certain balance in the bank, then you could still have a reverse mortgage, but you would not want to borrow money and put it in an account that would cause your bank balances to exceed your allowance.  You would want to be careful to borrow only as needed and what you would spend before your monthly statement was prepared.  The key is to be sure you are aware of all the restrictions before you proceed.

Question From Tom R. on 2/28/2018
In September 2017 we got a reverse mortgage. However to close the transaction we had to come to closing with almost $22,000 because of a lower than expected appraisal. That was direct cash out of my pocket, is that a tax deduction?
Expert Answer

Hi Tom,

By law and licensing rules, I cannot give you tax or legal advice.  However I can just remind you that it will probably also depend on what the $22,000 was used for.  You need to take your closing paperwork into your tax professional so that they can see what the $22,000 went toward.  He or she can tell you how much, if any, of it is tax deductible.  For instance, if you got a 0 fee loan at the time and the entire $22,000 went to paying off a portion of your old loan, I don’t think you will be able to deduct any principal reduction amounts you paid.  But only a review of your closing documents will tell your tax professional for sure what the money was used for and what can be deducted.

Question From Warren K. on 1/24/2018
What are the tax ramifications of income from a reverse mortgage?
Expert Answer

Hi Warren,

You need to speak to your tax attorney or cpa for tax advice. We are not licenced to give tax advice and are specifically prohibited by our license to give tax or legal advice.

When you do speak with your tax professional, be sure you use the correct verbiage though.   You said "income from a reverse mortgage..." when in fact, the proceeds are borrowed funds, not income. Just like any other loan, you are borrowing money against your home.  No one is paying you an income so they need to know you are entering into a loan transaction with a reverse mortgage. 

Question From Bob J. on 12/05/2017
I have a reverse mortgage my spouse passed away if I have to be late on making payment of real estate taxes is that OK and what are the payment plans?
Expert Answer

Hi Bob,

Your agreement to obtain the reverse mortgage is to keep the taxes and the insurance current.  If there is an issue on this requirement, you really need to speak with your servicer to determine what they can work with you and that will depend on your needs and the circumstances.

Question From Esther on 11/20/2017
I live in Texas and I am interested in adding my mom to the deed to my house. How do I do this without paying a lawyer. I do not want to be taken off of the deed I just want her to be on it.
Expert Answer

Hi Esther,

This question is not  related to the reverse mortgage but rather to the title of your home.  I know you do not want to pay for the services of an attorney, but let me just suggest that you consider looking into free legal aid or paralegal or someone just to protect your interests.  If you have a reverse mortgage, adding mom will not affect your loan.  However, if you do not file the paperwork correctly when you record your Deed, you could create a taxable event which could cost you a lot of money through the years if it causes the assessor to reassess your home when they should not.  An attorney or title professional may be able to be sure that you are not charged more in taxes year after year simply because of the transfer.

Question From Robert on 11/08/2017
Can I defer my property tax if I have a reverse mortgage?
Expert Answer

Hi Robert,

HUD does not allow borrowers to enter into a tax deferral situation if they have a reverse mortgage.  Because taxes are a lien that is senior to the mortgage, one of the agreements you have to make in order to receive a reverse mortgage is to always pay your taxes as they are due which precludes the use of a deferral.

If you are looking at a new reverse mortgage, HUD does allow you to get a LESA, a Life Expectancy Set Aside, that will set funds aside from the loan and then pay the taxes and insurance on the home for you as they become due.  There is no fee to set a LESA up and the funds are not considered borrowed until they actually send them to pay your charges so you do not accrue interest on that amount until they are used to pay your taxes or your interest.  If the funds are never used to pay your charges before you sell the home or move out for whatever reason, then they were never borrowed and do not have to be repaid so the LESA has worked well for many borrowers.

Question From Lowell S. on 10/21/2017
Is mortgage insurance mandatory on reverse mortgage? Is mortgage insurance income tax deductible?
Expert Answer

Hi Lowell,

There are proprietary or private programs that do not require mortgage insurance available by they do not work for all borrowers and they are more strict than the HUD programs (that do require the Mortgage Insurance Premiums).  I cannot give you income tax advice and you should check with your tax preparer, but I think you will be happy with the answer now regarding deductibility.

Question From Carol P. on 9/21/2017
Im thinking about doing a reverse mtg. with the tenure option. The money that goes into my bank account, will that be reported to IRS. How do I deal with that?
Expert Answer

Hi Carol,

Money sent to you on the tenure option are loan draws from your line of credit, not income.  Therefore it is not money that you report to the IRS as income.  However, as always, we recommend you speak to your own CPA or tax preparer on all tax related matters.  I think you will be pleased.

Question From Abby on 9/02/2017
If a person has a Reverse Mortgage along with a tax deferral program set up by the state of Oregon. Who is responsible to pay back taxes if the person who has the RM dies? I understand that the house can be given back to the bank, but what about the back taxes?
Expert Answer

Hi Abby,

Interesting question.  Firstly, one of the terms of the reverse mortgage is that the borrower is to maintain all taxes and not enter into a deferral program.  The servicer maintains a tax service contract on all homes and should have seen that the taxes were not being paid and addressed this situation prior to this time (and may have done so with notices to the borrower). 

If the heirs intend to keep the home, then the taxes would be part of the expenses they would have to consider.  After all, the borrower owns the home and if the ownership passes to an heir, the home would belong to that heir complete with all equity and payable expenses.  If they chose not to keep the property and made no effort to pay off the reverse mortgage loan, then the lender/HUD would have to foreclose on the existing loan and would incur the expense to liquidate the property.  The loan is a non-recourse loan and the lender can look only to the property for loan repayment. 

This is one of the reasons why it is so important that borrowers understand that delinquent taxes can cause them to lose their homes.  Borrowers are responsible for payment of their taxes and insurance even after the reverse mortgage and failure to do so could result in the lender calling the loan due and payable. 

Question From Patrick G. on 4/30/2017
We got our reverse mortgage in 2013 and we have to pay our own property taxes the town well let us make payments but the lender wants it to be payed in full at all times could we do an escrow arrangement where we make monthly payments and they pay are taxes or do we have to remortgage.
Expert Answer

Hi Patrick,

This is tough to answer without more information but if the payments the town allows are standard installments at which there are no fees or penalties and you are considered as agreed at all times, then the payments should be allowed.  If the county or town allow you to make payments but you are technically outside of the allowed methods and timeframes, then it is not allowed.  The only escrow arrangement with a reverse mortgage has to be set up before the loan is closed and that is a set aside to pay the taxes and insurance.  If you have the funds in your reverse mortgage available, possibly you can take out enough to pay one installment of the taxes and then begin to pay them for the next year in your payments which would always put you a little ahead, but always on time as well if those payments are not the as agreed payments?

Question From Hochberg on 3/22/2017
A non recourse reverse mortgage is surrendered by deed in lieu of foreclosure. The value of the home is less than the balance of the loan is the remaining debt that cannot be recovered by deficiency proceeding because of no recourse condition set forth in the original mortgage subject to IRS rules concerning debt forgiveness as income.
Expert Answer


As much as I would love to tell you my understanding and interpretation of this subject, there is no doubt that would constitute tax advice and I simply cannot do so due to the fact that I am not licensed to give tax or legal advice.  However, I can very wholeheartedly suggest that you contact a tax attorney or your CPA and pose this question to him/her.  

Question From Linda on 2/17/2017
On a reverse mortgage after death of owner, can IRS tax the forgiven debt of the amount that was charged for fees that amounted to $30,000 more than HUD was able to sell the property for when property given back to HUD?
Expert Answer

Hi Linda,

I'm sorry, this would be information you would need to request from your accountant or trusted tax attorney.  There may be provisions and "what if's" involved and we are not licensed to give tax or legal advice.

Question From Ron on 1/16/2017
Expert Answer

Hi Ron,

A reverse mortgage is a loan just like any other loan.  If you pay real estate taxes, your loan does not affect your ability to claim the real estate taxes that you pay.  Interest is also deductible but there is one caveat, it is deductible when you pay it.  So if you choose not to make any payments on the loan, I would bet that your accountant will tell you that you cannot claim interest that you did not pay yet.  However, I am not licensed to give accounting advice so you really need to contact a CPA or tax professional for that consult.

Question From Thomas Burgess on 11/21/2016
I am enrolled in a county tax office program where I pay twenty percent of the old remaining balance and keep the current taxes paid I am current sense unrolling will this affect my loan ability.
Expert Answer

Hi Thomas,

If you are in a tax deferral program, all taxes would have to be brought current and then the full amount due would have to be paid from this point forward.  In addition, please forgive me but I am not 100% sure of the circumstances of your situation so I do need to just make one other clarification.  If you were paying just 20% of your owed taxes but 100% of the amount required of you and on time, that would not adversely impact your ability to get the loan or the amount you would receive (other than paying all amounts due).  However, If you were enrolled into the program as a result of non or late payment of taxes due, you would be required to receive a Life Expectancy Set Aside (LESA) for payment of the taxes and insurance and that would affect the amount you would receive.

A LESA is not a fee, it is just money from the loan that is set aside and used to pay the taxes and insurance as they become due.  The funds in the LESA are not considered borrowed and you do not accrue interest on them until the money is actually used to pay the expense.  Many borrowers like the LESA due to the fact that they never have to pay for the taxes and insurance on the home again and they only accrue interest on the funds as borrowed funds as they are paid out so the effect on the interest borrowers accrue on the debt is very minimal in most cases.

Question From Desadier on 9/09/2016
Does a person who's property is under a reverse mortgage rent a room and not report it
Expert Answer

We are not qualified to give tax advice but I can say that you are perfectly allowed to rent a room and that would not be any problem with the reverse mortgage loan. I would suggest you ask your tax professional what type of deductions you might be able to claim under your circumstances. 

Question From Tom G on 8/26/2016
We purchased a new home in October, 2014 using a reverse mortgage to acquire the property. On December 31, 2014 the principal balance on the reverse mortgage was $391,573. In December 2015 we paid off the reverse mortgage balance and took out a conventional home mortgage. We received a 2015 Annual Year-End Statement showing that the Interest accrued on the reverse mortgage in 2015 was $19,510, that the MIP paid to HUD was $4,820 and that the repayment made was $415,903. No other amounts shown on this form. I am confused as to how to determining the amount that is tax deductible on our 2015 Form 1040, and on our California Form 540 tax returns. Can someone provide clarification or direct me to a source for a definite answer?
Expert Answer

Hello Tom,

You need to seek the advice of a tax professional. We are a mortgage lender and do not have the legal right to give personal tax advice. You may also get more specifics by contacting your servicing company and their phone number will be on your monthly statement. 

Question From William D. on 8/13/2016
Is reverse mortgage taxable
Expert Answer

Hello William,

Any proceeds that you receive as a result from the reverse mortgage is not considered income and would not be taxable. 

Question From Rosita M on 4/27/2016
Can a caregiver claim my mother as a dependent on her income taxes, if my mother has a current reverse mortgage? will this jeopardize her loan?
Expert Answer

Hi Rosita,

I'm sorry, I'm not licensed to give tax advice and quite honestly I would not know how to answer a question about what a caregiver can or cannot claim on their taxes anyway. With regard to the reverse mortgage loan, how your mother's caregiver files her taxes will have no effect on your mother's loan. As long as your mom lives in the property as her primary residence and abides by the other requirements of the loan (pays the taxes, keeps the property insured, maintains the home in a reasonable manner) in your mom's loan is fine.

Question From Cal Lewallen on 4/14/2014
Are there any tax deductible fees or costs in a reverse mortgage?
Expert Answer

Hello Cal,

I'm sorry but this is one of a couple areas in which I can't help.  I am not licensed to give tax or legal advice and would never want to steer someone in the wrong direction.  For tax information, I would strongly suggest that you speak to your financial advisor or CPA.

Question From Ron Rita on 1/06/2013
Does a reverse mortgage automatically takeover my existing loan, so I loose my interest deduction?
Expert Answer

Hi Ron,

It doesn't take over your existing loan but like any refinance, it pays the current mortgage in full so that the only loan remaining on the property is the reverse mortgage.  You need to speak with a qualified tax specialist as I cannot give you tax advice, but my understanding is that interest is deductible when it is paid, not accrued.  If that is the case, you still have interest that accrues but you cannot use it as a write-off until you actually pay it.

For most borrowers, this would be when they sold the home or paid off the mortgage through other means.  Some borrowers choose to make a payment of some sort on a monthly, quarterly or annual basis as a tax planning and equity retention method.  While an interim payment is not required on a reverse mortgage, you can pay whatever you like up to and including payment in full on a reverse mortgage at any time and there is never a prepayment penalty.  Borrowers are responsible to pay the taxes and insurance and maintain the home and some borrowers choose to enjoy living in the home, with just those expenses for the rest of their lives.  Some borrowers choose to make payments regularly to keep the loan balance from rising.  Some simply look at their tax situation near the end of each year with their accountant and make a lump payment only those years when they and their tax advisor feel it is advisable.  At any rate, this is something you really need to discuss with your tax professional before you obtain your reverse mortgage to make sure that it is the best solution for your situation.

Question From Lisbeth on 7/20/2012
It is allowed to defer property taxes if you have a HECM? The state of MA allows qualifying seniors to apply annually to defer property taxes.
Expert Answer

Because the balance of the mortgage grows, borrowers are required to maintain the property, keep the insurance active and to pay all property taxes as they become due.  Many states do have provisions for tax deferral under certain circumstances but HECM borrowers agree to keep all taxes current when they sign their loan documents.  

Question From Dee on 6/20/2011
Dear All Reverse Mortgage, I have a question regarding “deferred property taxes”

If we clear up any back taxes at the time of closing, is all right to start deferring taxes again while we are using our Reverse Mortgage? It was stated that these are considered “deferred taxes” and are not considered “delinquent taxes”. While that statement is true, it was my understanding that all taxes and insurance are to be kept current after closing. Meaning they would be paid each year where there would not be any indebtedness incurred on the property up until the property is sold or the last owner passes away?

This is such a very important point that he was so kind to refer me to you for confirmation and clarification. Thank you so much for your attention to our concerns.

Expert Answer

There are many taxing authorities that do allow for tax deferral programs – however, there is typically a catch. In most states, if a person enters in to a tax deferral arrangement with their taxing authority, then that tax deferral automatically takes a first lien position on the property. The problem with this, as it relates to a reverse mortgage, is that it is a violation of the terms of the mortgage to have any lien on the property that supersedes, or takes the place of, the first lien position held by the reverse mortgage lender.

As a result, most tax deferral programs do not qualify under the loan terms for reverse mortgages. There are two states that I know where it is acceptable for a reverse mortgage borrower to enter into a tax deferral program: Oregon and Massachusetts. The reason why these two states are acceptable is that they specifically do not take a first lien on the property with their tax deferral agreement.

However, while tax deferrals are not allowed for most states, we always encourage people to look into local tax exemptions – which may help to significantly reduce your property tax obligations. I hope that this information has been helpful. Please let me know if you have any additional questions that I can assist you with.

Question From Stephen on 2/24/2011
Can you deduct the property taxes and interest when you have a reverse mortgage?
Expert Answer

Property taxes, absolutely. You can continue to deduct them since you still pay them just as you do with any other mortgage. Mortgage interest is a different situation. You really need to speak with a qualified accounting professional as we cannot give tax advice but most professionals agree that interest can be deducted with paid, not when accrued. What this means is that if you make any payments on your loan during the year, any interest you pay is deductible at the time you make that payment. However, since reverse mortgage loans are designed so that the borrowers do not have to make payments, most borrowers do not and under this scenario would not have any interest to deduct since none was paid. Some borrowers who do have the means to make payments and need some additional write-offs do meet with their accountants each November or December and determine how much they need to pay to greatly improve their tax situation. Another example of how a reverse mortgage is truly a financial tool. Learn more on reverse mortgages and tax deduction.

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Author Michael Branson
About the Author, Michael G. Branson |
Michael G. Branson CEO, All Reverse Mortgage, Inc. and moderator of ARLO™ has 45 years of experience in the mortgage banking industry. He has devoted the past 19 years to reverse mortgages exclusively.
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