By Steven Hyde, Founder, Hyde Funding · NMLS #391380. Reviewed December 14, 2026. Hyde Funding is a mortgage lender headquartered in San Diego, lending nationwide since 2015.
Short answer: No. The IRS says reverse mortgage payments are loan proceeds, not taxable income, whether you take a lump sum, monthly advances or a line of credit. Reverse mortgage interest generally can’t be deducted until it is actually paid, usually when the loan is paid off, and even then only in some cases. You still owe property taxes.
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The IRS senior taxpayer FAQ is direct: reverse mortgage payments aren’t taxable because they’re loan proceeds. You keep title, and depending on the plan, the loan comes due when you move, sell, reach the end of a set term or pass away.
Interest builds up on a reverse mortgage but usually isn’t paid until the loan ends. The IRS says this interest generally isn’t deductible, because it’s treated as interest on home equity debt. Even when it is allowed, you can’t deduct it until it’s paid. If the money was used to buy, build or substantially improve the home, the rules may differ. See IRS Publication 936 and ask your tax preparer.
A reverse mortgage doesn’t change your property tax bill, and you must keep paying it. See property tax and insurance obligations. If you move, Proposition 19 may affect your new tax bill (BOE).
Reverse mortgage proceeds aren’t income, so drawing them doesn’t increase the income used to tax Social Security benefits or to set income-based Medicare premiums (IRMAA). Coordinate with your CPA. See Social Security and Medicare.
After the last borrower passes, the estate repays the loan when the home is sold, and the heirs keep whatever equity is left. Inherited property usually gets a stepped-up tax basis, which often limits capital gains tax. Take estate tax questions to your attorney or CPA. See heirs and inheritance.
Even though proceeds aren’t taxed, means-tested programs still see them. Money you still hold at the start of the next month can count against SSI and Medi-Cal limits (benefits guide).
Whatever your question, these basics apply. A Home Equity Conversion Mortgage (HECM) is the FHA-insured reverse mortgage most homeowners use. The youngest borrower must be at least 62, the home must be your primary residence, and you need enough equity. Any existing mortgage is paid off at closing. Counseling with an independent HUD-approved counselor is required before you apply (HUD counselor search). The lender then reviews your income, credit and history of paying property charges.
No monthly mortgage payment is required. Interest and mortgage insurance are added to the loan balance, so it grows over time and your equity shrinks. You keep title, and you must keep paying property taxes, homeowners insurance and HOA dues and maintain the home. The loan is repaid when the last borrower, or an eligible non-borrowing spouse, sells, moves out permanently or passes away. A HECM is non-recourse: neither you nor your heirs will ever owe more than the home is worth when it is sold (CFPB). For higher-value homes, a proprietary jumbo reverse mortgage may be an option, but it isn’t FHA-insured and its terms differ. See how reverse mortgages work for a full walkthrough.
Bring this list to your HUD counseling session and to your call with Steven at (858) 775-1005.
Hyde Funding is a San Diego mortgage lender founded in 2015, with an office at 8996 Miramar Rd. Suite 250. Steven Hyde (NMLS #391380) will walk you through the tax side of a reverse mortgage with your advisor in plain English and compare HECM and proprietary reverse options. Your family or advisor is welcome on the call. Every HECM borrower first completes independent HUD-approved counseling (find a counselor on HUD.gov). Start with a free reverse mortgage consultation, read the reverse mortgage hub, or see reverse mortgages in San Diego.
No. The IRS treats reverse mortgage payments as loan proceeds, not income.
Generally not until it is paid, and often not at all. Ask a tax professional.
Yes.
No. Proceeds aren’t income, so they don’t count toward that calculation.
Talk to Steven: (858) 775-1005 · Free consultation · Apply now
Steven Hyde, NMLS #391380 (NMLS Consumer Access). Equal Housing Opportunity. Reverse mortgage borrowers must live in the home as their primary residence, keep paying property taxes, homeowners insurance and HOA dues, and maintain the home, or the loan may become due. The loan balance grows over time. HECMs are insured by FHA. Hyde Funding is not affiliated with HUD, FHA or any government agency. This is general information, not a commitment to lend. Consult a financial or tax advisor.