Can you avoid tax on accrued interest for reverse mortgages?


If you have a reverse mortgage, have taken a lump sum in advance and have a big line of credit, you are probably wondering if you can list the accrued interest on the tax returns, thus avoiding tax on accrued interest on the reverse mortgage According to the IRS, accrued interest on a senior citizen reverse mortgage will not be tax-deductible until you actually pay the lender. This happens in general when the reverse mortgage amortizes in full, or when the owner of the house sells the property or moves out permanently.

Nevertheless, your mortgage company may agree to accept annual payment of reverse mortgage interest and in that case payment would qualify as itemized tax deduction on Schedule A rather than as tax on accrued interest for reverse mortgages.

However, you should consult a tax advisor in person to make sure any assumptions regarding tax exempt accrued interest on a reverse mortgage are going to work out.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: