Interest on a reverse mortgage is not deductible by the home owner until it is paid, which doesn’t happen until he dies or moves out of the hosue and repays the mortgage. The exception is any origination fees paid in cash at the outset. Sign into your Account | Create an Acccount. Guiding borrowers to the right decisions.
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. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt .
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None of the interest maybe deductible or even up to all of it can be depending on the facts and circumstances related to that loan and any debt that was refinaced through the reverse mortgage. The tax law on mortgage interest fundamentally changed during 1987 and related regulations along with it. Before 1988, the deduction for home mortgage.
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The Tax Implications of Reverse Mortgages. It’s tax season. For both new and prospective reverse mortgage borrowers it brings to mind questions about how the money from a reverse mortgage is best handled from a tax perspective. In either case, there are a few things you should know from a tax perspective.
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On the down side, all the interest that accrues on your reverse mortgage is not deductible by you until you actually pay it, which is usually when you pay off the loan in full. Moreover, your mortgage interest deduction is usually subject to the same limits as other home equity loans-that is, you can deduct the interest on no more than a loan of $100,000.
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At that time, because your loan will be paid in full (and will include the accrued interest), you are eligible to claim the deduction. But beware: According to the IRS, a reverse mortgage is generally.
Raskie’s discussion of reverse mortgage benefits and risks includes a note on the financial assessment and the required set-aside that results for some borrowers. He notes the origination fees.
Interest Deduction. Interest is the largest potential deduction. The IRS says "Any interest. accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full." (Publication 936 "Home Mortgage Interest Deduction"). This is an old rule that the IRS established in 1980.