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Are The Proceeds From A Reverse Mortgage Taxable?

The proceeds from a reverse mortgage are not taxable as they are, in whatever form distributed, equity in your home. Since it is your primary residence, you do not incur any tax liability.

Why Won’t I Owe Any Taxes On My Reverse Mortgage Distributions?

With the current formulas and loan limits in place relating to reverse mortgages, it would be difficult, after interest and carrying costs are deducted, to exceed the federal income tax exclusions for a primary residence.

What Are The Federal Income Tax Exclusions On A Primary Residence?

For a single person having lived in a primary homestead for two out of any five years, the income tax exclusion is $250,000. If the homestead belongs to a couple, income tax is excluded on $500,000 of gain. These income tax exclusion laws changed in past years from a one time exclusion at a certain age to a continuing exclusion, regardless of age, so long as the mandatory rules of time owned and lived in the primary residence are complied with.

Does This Mean I Might Owe Income Taxes On My Home In The Future?

If you decide to pay off your reverse mortgage early, put your house on the market. and sell it for a huge profit that exceeds government guidelines, there is a possibility that you might owe income tax. That would be an enviable position to contemplate! However, you still are not liable and will not owe income tax on any proceeds that you receive from your reverse mortgage.

Will Income From My Reverse Mortgage Affect My Social Security Payments?

No, because it is not earned income. Your proceeds from a reverse mortgage are not taxable. Benefits such as SSI, however, could be affected as they are based on any income or assets available to a household.

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Are The Proceeds From A Reverse Mortgage Taxable?

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