Reverse Mortgage Interest Deduction

President Obama Refinance Program Seeing as how his jobs plan is still tied up in Congress, President Obama’s on the road again – Nevada today – to announce new rules to help homeowners refinance their mortgages.

One versatile solution is a reverse mortgage. It lets you stay put. Security benefits are taxed or your eligibility for Medicaid. You or your heirs can deduct interest on a limited amount of debt.

While there will still be a lien on your home for the outstanding amount of the reverse mortgage, you are not required to make monthly principal and interest.

However, the important caveat to the reverse mortgage interest deduction is that under IRC Section 163(h), the interest is only deductible when it is actually paid. Which is a big deal for a reverse mortgage, because the borrower is typically not making interest (or any payments) on an ongoing basis!

Home mortgage interest. You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.

and no more than $35 monthly if the interest rate adjusts monthly. When you close on your reverse mortgage, your lender will deduct the servicing fee cost from your available loan funds and add it to.

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The relevant reverse mortgage fees for a HECM loan are: mortgage insurance premiums (MIP) Origination fee; Servicing fee; Third party fees; Insurance Premiums. When you are taking out one of these loans, you will need to pay a mortgage insurance premium at closing and an annual MIP for the entire life of the loan.

Home Equity Line Of Credit Deductible

The interest charged on a reverse mortgage generally accumulates until the mortgage is terminated, at which time the borrower(s) or their heirs may or may not be able to deduct it (For more, see.

The relevant reverse mortgage fees for a HECM loan are: Mortgage insurance premiums (mip) Origination fee; Servicing fee; Third party fees; Insurance Premiums. When you are taking out one of these loans, you will need to pay a mortgage insurance premium at.

Jan 18 update: added new Michael Kitces blog on acquisition vs home equity mortgage interest treatment below. BY TOM DAVISON ON DECEMBER 31, 2017 Important income tax changes in december 2017 affect reverse mortgages. The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated deductions for home equity interest starting in 2018.

 · The Mortgage Interest Deduction Using an example property purchased for $325,000 with a $260,000 loan, we’ll assume that mortgage interest.