Interest on a Reverse Mortgage

[MartyDC]

A family member will be selling their house in a few months.  The gain will be in excess of the $250K deduction allowed to a single person.  Various self-proclaimed "experts" have told him that he can add to the basis the interest he has paid over the last 15 yrs. on his reverse mortgage.  Anyone out there have an opinion?

[Vanessa A]

No, It is not added to the cost basis of the home. 

Depending on what they used the reverse mortgage money for, the interest may or may not be at all deductible.  This is still mortgage interest and still treated as such.  That means, you can only claim the interest as an itemized expense in the year that you pay it.  If you do not itemize your return you cannot claim the interest.

Additionally, in order to claim the interest on the mortgage, the money would have had to been used to buy, build or substantially improve the house.  If it was NOT used to buy, build or substantially improve the house, the interest is not deductible.