Similar to a conventional mortgage, some of the costs associated with getting a reverse mortgage are tax deductible, as are any interest payments a borrower might make. For example, reverse mortgage origination fees and any broker fees can be claimed, says Joe Diaz, owner of American Essential Services, a tax preparation company located in Kissimmee, Fla.

And, he continues, if broker gives a borrower a “discount” on the loan’s interest rate in exchange for a “discount point,” that’s also tax deductible. Here’s how it works: A mortgage broker gives a borrower a loan at a bank’s “par” rate, the rate at which a broker doesn’t have to pay a fee in order to “buy” the loan from a bank.

However, the borrower may ask for a lower “par” (interest) rate. In that case, the broker will lower the rate, but charge the borrower an upfront fee, or “points,” and those points are tax deductible.

Intangible Taxes May Be Deducted

Additionally, reverse mortgages in some states like Florida, the “intangible fee” can also be claimed.

“The key thing would be, make sure the borrower saves their final settlement statement (which lists the various fees) when they close, for when tax time comes,” says Diaz. “Sometimes the IRS doesn’t get everything reported correctly, and you have to have all your ducks in a row.”

These deductions can all be listed on Schedule A of a 1040 from, he says.

While one of the perks of getting a reverse mortgage is not having to make a monthly payment, for those who wish to control their balance, making interest payments is something to consider. However, it’s important to note that this doesn’t mean a borrower can claim the interest that accrues on the loan, unless they pay it off.

Here’s what the IRS has to say: “Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full.” If you do pay the interest, though, it’s fair game for tax deduction.

Payments Must Be Applied to Deduct Interest 

“If you’re not making a payment, then Internal Revenue is not going to get a report from the reverse mortgage servicing department that interest is being paid,” explained Diaz. “In order to claim the interest, you have to be making a payment.” In another scenario, where a borrower does not choose to make any payments on the reverse mortgage loan on accrued interest, that person’s heir can claim the amount of interest they paid on the loan.

“If the heirs pay off the interest on a reverse mortgage after the borrower dies, they can claim it in the year that they pay it,” says Michael Darrett, a CPA at Chicago, Ill.-based Liberty Tax Services. But, he adds, there are still limitations, as the amount of interest claimed cannot exceed $100,000.  This is the limit on the amount of debt that can be considered home equity debt, which is how the IRS views reverse mortgage loans.

How Interest Repayments Are Applied 

Another thing to keep in mind is that pre-payments to reverse mortgage loans are applied to the loan balance in a specific order: first, to accrued mortgage insurance premiums; second, to accrued monthly servicing fees; third, to accrued interest; and last, to the remaining principal balance.

When reverse mortgage borrowers make payments, they’re issued a 1098 statement, typically generated when a reverse mortgage loan is repaid partial or in full.

These interest statements, which break down the amount of mortgage insurance premiums and interest actually paid by the borrower during the prior calendar year, are generated and mailed to borrowers in January of each year, and can be used for income tax filing purposes.

Interest Deduction FAQs


How does a reverse mortgage affect your taxes?

A reverse mortgage is not income, it is borrowed money and so it is like any other loan. Borrowers need to consult with their own CPA/tax professional for their own circumstances.

Do you get a 1098 on reverse mortgage interest?

You do get a 1098 but only when the interest is actually paid. For more information on tax matters, borrowers should consult with their own CPA/tax professional for their own circumstances.

Does Reverse Mortgage count as income?

The funds you receive from your reverse mortgage are borrowed funds; they are not earned income.

Are any reverse mortgage costs tax deductible?

The reverse mortgage is a home loan, like any other. To determine the exact deductibility of any specific expenses, borrowers should consult with their own CPA/tax professional for their own circumstances.

Who pays property taxes on a reverse mortgage?

You always own your home and are responsible for your taxes, insurance and property maintenance.

The experts at All Reverse Mortgage® are here to answer your questions but we’re unable to provide specific tax advice. Always contact your trusted tax professional to get advise on your personal taxes.