No, you can't deduct the $500 appraisal fee because closing costs are not deductible.
- You can only deduct closing costs for a mortgage refinance if the costs are considered mortgage interest or real estate taxes or points (prepaid interest).
Reverse mortgages are not entered on your tax return. Reverse mortgage payments aren't taxable. Reverse mortgage payments are considered loan proceeds and not income. ... 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). Source: Coleen3
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