Is reverse mortgage interest deductible

[Critter]

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.

[Marshafaye]

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

[Irene2805]

Yes -- Congress passed legislation last December that reinstated the deduction for Mortgage Insurance Premiums .  To enter your mortgage insurance premiums, please follow these steps:

1. Click on Federal  > Deductions & Credits
2. In the Your Home section, clicking the Start/Revisit box next to Mortgage Interest, Refinancing, and Insurance (Form 1098). 
3. If you've already entered information on your mortgage, you will be brought to the Mortgage deduction summary screen.  Click the Edit box next to your lender's name. Continue through the screens until you reach Let's get the details from your [lender's name] 1098 now.  Enter the Mortgage Insurance Premiums in Box 5 - Mortgage insurance Premiums.
    

[dcb1995]

This last step for Mortgage Insurance does not work because TurboTax requires that the mortgage balance and origination date not be blank.

[Liberty1]

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

[dcb1995]

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.

[DJ1919]

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,

[PattiF]

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).

[DJ1919]

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?

[PattiF]

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.

[DJ1919]

I guess the quandary is that my mom back in 2003 took the reverse mortgage to pay off the mortgage she had on the house (around $80,000 originated in 1985) and took extra money from the reverse mortgage for improvements:  to add a double garage, finish the basement and add a bathroom.  The initial reverse mortgage draw came to around $200,000 ($80k to pay off mortgage and $120k for improvements).  In 2020 when she passed, the loan amount to be paid off was around $360,000 which I paid off.  The interest came to around $130k.  Knowing these facts, do you think this changes the deductibility of the mortgage interest?

[PattiF]

It does seems the some of the interest would be deductible since the initial reverse mortgage was for improvements. The interest on $100,000 would be deductible since that is the limit for home equity loans. 

An accountant might be the best person to determine the interest on that amount. A proportional amount would be $36,774. You would need to have documentation of the initial use of the funds if the IRS has any questions.

[Islandbob]

How to spread the enormous amount of interest paid on my reverse mortgage as  reported on form 1098 by the lender to  benefit me  tax wise for several years.??

[DaveF1006]

Here is the IRS position on interest accrued from reverse mortgages. "Interest (including original issue discount) accrued on a reverse mortgage isn't deductible until you actually pay it (usually when you pay off the loan in full)."  What is reported on the 1098 is accrued interest and not paid interest.

[gkulesza]

On the 1098, it does shown Mortgage Insurance Premiums.  Can I deduct those premiums.  Also am thinking of selling the house and moving.  Could I then use the mortgage Interest received from Payers/borrower(s)? after the sale of the house?