It is not - unless you paid off the loan in full.
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.
However, for reverse mortgages, you can deduct amounts you paid for qualified mortgage insurance. The insurance must be in connection with home acquisition debt- the deduction is not available for the portion relating to other types of indebtedness, such as home equity indebtedness. Also, the insurance contract must have issued after 2006.
For more information, please refer to IRS publication 936, page 8.
It is not - unless you paid off the loan in full.
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.
However, for reverse mortgages, you can deduct amounts you paid for qualified mortgage insurance. The insurance must be in connection with home acquisition debt- the deduction is not available for the portion relating to other types of indebtedness, such as home equity indebtedness. Also, the insurance contract must have issued after 2006.
For more information, please refer to IRS publication 936, page 8.
It is still not clear to me that any of the Mortgage Interest or MIP I accrued on my reverse mortage is deductible now that I've sold my house. I received a Form 1098 from the lender showing the total amount of interest received from the payer in Box #1 and MIP premiums in Box #5. If any of this is deductible, how many years can I spread this deduction out?
I'm still waiting for an answer to my question about number of years this significant amount (over $16,450) can be carried forward, and I would like to know what is meant by "home equity indebtedness."Seems like over $90,500 in interest deduction is a lot to kiss goodbye.
I have the same question. is there some guidance that can be given? walking through TT there is no mention of where to enter the interest and/or MIP for a Reverse Mortgage - only a HELC or regular mortgage. This should be addressed in TT due to the number of Reverse mortgages and the potential of payoff and sale of a home that has a Reverse mortgage
The relevant IRS Publication is 936. Page 5 reads to me as a "no" - not deductible
Reverse mortgages.
A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. With a reverse mortgage, you retain title to your home. Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive isn't taxable. Any interest (including original issue discount) accrued on a reverse mortgage is considered home equity debt and isn’t deductible.
What if the reverse mortgage is for purchase of new home and one pays the interest on the reverse mortgage on a monthly basis? Would this be considered payment acquisition debt and therefore be considered tax deductible? My guess is that the mortgage company would have to issue a 1098 for interest paid in that year, and that it would be tax deductible for up to a limit of $750k over the lifetime of the loan, right?
Are you sure you have a reverse mortgage and not an Equity Loan (HELOC) ? Normally there are no payments due on a reverse mortgage.
Yes my loan is a reverse mortgage, but I am going to voluntarily pay the interest each month to keep the loan balance from growing. However, because they are voluntary payments, I can stop paying them when I want ie. if we have a decrease in income due to illness or death of one of us. Also, because the payments will add to a line of credit I can borrow the money back if times get tough or I need to make expensive repairs at some point.
Thanks for your response.
Interesting ... well if you get a 1098 from the mortgage company showing the interest paid then according to the tracking rules if you used it for the purchase of a primary residence I guess it could be deductible ... however if the home you have the loan on is no longer homesteaded as your primary residence this will make the outstanding balance due immediately. Seems like a slippery slope.
How do I indicate a reverse mortgage in Turbo Tax? I only see options to designate the mortgage as a refinance or a HELOC. How do I designate a HECM???
A reverse mortgage is NOT entered on an income tax return since you are not making payments on the loan. You cannot deduct the accruing interest on the loan.
I did not pay it off, but I DID make voluntary payments in 2019 ... so the lender issued a 1098.
And in order to report that 1098, I need to designate this loan as an HECM.
Which brings me back to my initial question of how I do that.
Technically it is a HELCO (that you don't need to make payments on) or a refinance of an original loan ... follow the interview screens.
Are the Mortgage Premiums charged deductible?? It sounds like laws were changed, however if so....where do I enter that? They show on the 1098
Yes -- Congress passed legislation last December that reinstated the deduction for Mortgage Insurance Premiums . To enter your mortgage insurance premiums, please follow these steps:
This last step for Mortgage Insurance does not work because TurboTax requires that the mortgage balance and origination date not be blank.
Is that for reverse mortgages too? We have a 1098 that says the MIP accrued is $1094.51 can I deduct that? My mother has a reverse mortgage and we got a 1098 for 2019 I’ve never seen a statement like this before do I do anything about it or just keep it ? Do I file anything? The 1098 says annual escrow and interest statement . she still alive and she still living in the house. Also We already filed her tax return but can I do an amendment to get the deduction for the MIP? Thank you
The interest portion is not deductible because it's being accrued, not paid; but the mortgage insurance amount shown on the 1098 is. My 1098 only had that figure and the "date of acquisition" field completed. TurboTax requires the original mortgage amount and date, so I used the date of acquisition for that and then used the amount of the reverse mortgage from my reverse mortgage closing statement from when I did the mortgage. I think these figures actually are irrelevant to the filing, but TT uses them to determine whether interest deduction should be capped. Since interest on a reverse mortgage is not deductible, this is a calculation TT shouldn't even be making, but since it does, you need to supply the numbers, since they are not required to be printed on this type of 1098.
I'm hoping you can help me. My mom passed in 2020 and I paid off her reverse mortgage so my brother could continue to live in the house. My mom received the 1098 reporting interest payment and outstanding principal.
I requested the 1098 be reissued in my name since I am an one of the heirs and I paid off the loan with my proceeds but they wouldn't do it. My mom's house is not my principal residence. Question, can I deduct any of the interest?
Thank you,
The interest deduction would be taken by whoever repays the loan for a reverse mortgage. The deduction is limited to interest paid on no more than $100,000 of loan principal.
Fortunately, Treasury Regulation 1.691(b)-1 does allow a decedent’s prospective deductible items that hadn’t been paid at death to be deducted subsequently when paid by beneficiaries. However, in many cases, the beneficiaries don’t have enough income either, especially when the estate inherits the house to liquidate but doesn’t inherit pre-tax retirement accounts that might have created taxable income (as the retirement accounts typically go directly to beneficiaries by beneficiary designation).
I paid the loan off in full since my mom had passed. The principal was $353,492 and the mortgage interest was $130,752. Based on this information, how much would I be able to deduct?
I wanted to clarify your situation as I have been doing additional research with my colleagues about this situation. Was any of this loan used to substantially improve or initially purchase the home where your mother was living? These loans are generally used just to keep the house that someone already owns.
The tax laws changed in 2017 to disallow many deductions of home equity loans. Reverse mortgages are considered Home Equity Loans. They are only deductible if used to substantially improve or purchase a home. If this is not your situation, I apologize for my earlier post that said that this was deductible when it might not be deductible.