Are funds taken out from a reverse mortgage subject to taxes?
Last updated: Oct 03, 2013
An anonymous 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?
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.
Actually, generally speaking reverse mortgage funds are not taxable, but they can be taxable depending on the your circumstances. You need to consult a tax professional or accountant and/or financial advisor in your state who is familiar with reverse mortgages. Sandy Jolley, Reverse Mortgage Suitability and Abuse Expert