Leveraging a Reverse Mortgage as a Tax-savvy Retirement Savings Tool
To retire comfortably, more and more retirees are considering the benefits of a reverse mortgage loan. This financial tool was designed exclusively for older homeowners to convert a portion of your home equity into funds you can use at your discretion — from managing debt to covering medical expenses or supplementing retirement income.
Another reason for a reverse mortgage’s appeal: tax savings.
Sorry, Uncle Sam
As an eligible borrower, the loan proceeds you receive from a reverse mortgage are considered loan proceeds, not earned income. That means the payments aren’t taxable. You can opt to receive funds from a reverse mortgage as a lump sum, monthly payments or a line of credit that’s available if and when you need it.
And they usually don't affect your Social Security or Medicare benefits. These programs consider your age, rather than your income or assets in their calculations. They may, however, impact needs-based benefits such as Supplemental Security Income or Medicaid, so it’s important to speak with a financial advisor regarding your unique situation.
Remaining in good standing is key
As with any mortgage, you must continue to meet your loan obligations, such as keeping current with property insurance and taxes. You’re also responsible for basic upkeep and home maintenance.
If you fail to meet the terms, your loan may become due and payable. You may be forced to sell the home in which capital gains on the sale may have an indirect impact on your taxes. The IRS does allow a special exclusion to lower the capital gains tax — or the fee you owe on your profits — as long as you own and have lived in the home as your primary residence for two of the last five years. If this is the case, you can exclude up $250,000 if you’re single, or $500,000 if you’re married and filing jointly, to lower the amount.
Curious about a reverse mortgage?
At RMF, we’ll walk you through the reverse mortgage process and beyond. And if you have any questions or concerns our specialists are only a phone call away.
Call RMF today at (888) 277-1567 to schedule a free appointment with a loan specialist in your area.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 4.7-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call 888-277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions.
This information is intended for those who are interested in financial education. This information is provided for convenience only, and RMF make no warranties concerning the accuracy or completeness of any of the information. Information is subject to change without notice, and RMF is under no obligation to provide updated information. Materials or statements made by a third party and located or posted on the Site are those of the third party and do not necessarily reflect the official policy or position of RMF. This is not financial, tax, compliance or legal advice and should not be taken or relied upon as such. Each individual should consult with his/her financial, tax, or legal professional. All mortgage origination services are provided by Reverse Mortgage Funding LLC, a state licensed mortgage lender, which is licensed or otherwise exempt from state licensing in the states in which it originates mortgage loans.