What are the tax consequences of a reverse mortgage? What about my Social Security and Medicare benefits?

A. Because reverse mortgages are considered loan advances and not income, the IRS considers the proceeds received by them to be non-taxable. Similarly, having a reverse mortgage should not affect your Social Security or Medicare benefits. Please contact your tax advisor to assess your particular situation. If you receive SSI, Medicaid, or other public assistance, your reverse mortgage loan advances are only counted as "liquid assets" if you keep them in an account past the end of the calendar month in which you receive them. You must be careful not to let your total liquid assets become greater than these programs allow. It may be wise to consult your tax advisor on this. *Another tax fact to bear in mind: Interest on reverse mortgages is not deductible on your income tax returns until the loan is paid off entirely. ... more