Are funds taken out from a reverse mortgage subject to taxes?
A fellow caregiver asked...
If a cash amount of $10,000 is taken out of a reverse mortgage account, will there have be taxes, state and federal, paid on that amount by the owner of the reverse mortgage who is 87 years old and blind?
Expert Answer
Barbara Steinberg is the CEO and founder of BLS Eldercare Financial Solutions, which specializes in helping families pay for long-term care for their loved ones. A registered financial gerontologist, she speaks regularly on the topic of paying for long-term care and is a financial expert for Caring.com.
Funds received from a reverse mortgage are not counted as taxable income. It is no different than taking funds from a home equity loan or line of credit. The funds are from the equity in the house, which you own. You are tapping your own asset. The reverse mortgage holder does not have to report or pay taxes on the cash taken out of a reverse mortgage.