Reverse mortgage-

[JON]

when does the interest become deductible?

[Lion]

When Paid

When it's actually paid. But, I'm no expert. Had one client look into it, but none have a reverse mortgage so haven't dealt with the practicalities of reporting.

[MLINDER42]

Reverse Mortgage

The interest is not paid till the mortgage is paid off by the sale of the property or the estate pays it off.Thefore no yearly deduction.

[abctax]

which is usually after death, when the mortgage gets paid off...

[Roland Slugg]

As others have correctly said, the interest is deductible when it's paid. This usually takes place after the borrower does one of the following: (1) dies, (2) sells the house, or (3) moves out of the house. However, a borrower may, if he wishes to do so, pay all or part of the accumulated interest at any time prior to one of those three "mandatory" events, and if he does, the interest paid is deductible in that year.

There are several legitimate tax planning and economic reasons why a borrower may decide to do this, and a good tax advisor should be alert to situations when it would be in a client's best interest to consider such a maneuver.

[New York Enrolled Agent]

Much of what is posted is confirmed by Rev Ruling 80-248

HOLDINGS
The interest is includible in the lender's gross income when it is actually or constructively received by the lender and is deductible by the borrower when it is actually paid by the borrower. Actual or constructive receipt or payment does not occur when the interest is added to the outstanding loan balance. Therefore, the interest is neither includible in the lender's gross income nor deductible by the borrower at that time.

[clr]

I have a reverse mortgage

I pay all of the interest accumulated during the year and the mortgage company sends me a 1098. The interest at present is 2.00%.

[dsi]

How can it be a reverse mortgage if YOU are paying the interest?

[OtisMozzetti]

Here's how it seems it could be...

How can it be a reverse mortgage if YOU are paying the interest?

Here's my explanation of how it seems it must be: each (month?) the reverse mortgage borrower gets a check from the mortgage issuer. That check represents principal amount outstanding, and there is also interest added to the balance due. This particular borrower PAYS the interest that is added (with part of the check received, or with other funds).

I guess you could call it a home equity loan where the amount outstanding increases each time a check is issued. It would appear not to be acquisition debt.

[clr]

Here is how it works

How can it be a reverse mortgage if YOU are paying the interest?

I made a reverse mortgage, it is a credit line for me to cash in at any time.

I get a statement every month. On this statement it tells me what I owe, what are the charges for the month, and how much more is available to me.

I can pay it OR not pay it and let my estate pay it when I'm gone.

If I choose to pay anything on it during the year I am paying interest.

This is available to people over 62 years of age.

Why leave it to the kids???????????????

[dsi]

clr, I still don't understand. What financial institution are you dealing with? I would like to read about their "reverse mortgage" program. It sounds so very different than what I've seen over the years.

[clr]

dsi

clr, I still don't understand. What financial institution are you dealing with? I would like to read about their "reverse mortgage" program. It sounds so very different than what I've seen over the years.

All reverse mortgages are the same from any mortgage company. If you want to pay it back
you can If you do not want to pay it back your estate will.

[OtisMozzetti]

home equity loan

I get a statement every month. On this statement it tells me what I owe, what are the charges for the month, and how much more is available to me.

I can pay it OR not pay it and let my estate pay it when I'm gone.

If I choose to pay anything on it during the year I am paying interest.

It sounds to me like the classic definition of a home equity line of credit. There is a limit on the amount of home equity interest that can be an itemized deduction on Schedule A, and the home equity interest counts against the taxpayer for purposes of the alt. min. tax.