Reverse Mortgage deduction

Forum|Forum|6 years ago
March 6, 2020
6 replies
75 views

We refinanced our primary home in Dec. with a Reverse Mortgage. We only paid for the appraisals on the house out of pocket ($500). Can we deduct this cost as part of the refinancing and if so, were do we report it?

HelenC12

Level 15

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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bobp1426Author

Level 2

Thanks. Another question. If I make some partial payments towards the loan, that would pay some of the interest and insurance charges accumulated. Since I paid interest, would that be deductible in the year I make the partial payments?

DaveF1006

Level 15

Yes, your interest payment would only be deductible in the year you made the payment.

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wibnel5151

Level 2

What deductions can I take?

PattiF

Level 15

There are generally no deductions that you can take. Interest isn't deductible until you actually pay it which is usually when the loan is paid off. The interest is deductible when it is used to buy, build or substantially improve the home that secures the loan.

Here is some information concerning a Reverse Mortgage from the IRS.

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joegoal

Level 2

You cannot immediately deduct the $500 you paid for the appraisal from your taxes if you have a reverse mortgage. Most closing costs and fees, including appraisals, aren't immediately deductible because, unlike a regular mortgage, you usually don't pay interest on a reverse mortgage until the loan is paid back. This reverse mortgage closing costs guide was very beneficial to me in understanding the associated costs.

Some of these expenses might be regarded as loan "points" and might even be amortized and deducted at the time of loan repayment if you ultimately pay interest when the loan is paid back (for instance, after selling the house). There isn't currently a deduction to include on your 2024 tax return.