What is a “reverse mortgage” you might ask? If you have received the mortgage at your retirement age, you can use the equity for anything that you want. This includes paying off your debts, building equity for a home improvement project or simply to take a vacation. While this sounds like a win-win situation, there are some things you should know.
One of the first things to know is that a reverse mortgage is not taxable. This is something that will shock you since you have to consider how much you make each year. Usually this amount will allow you to live comfortably on the equity and it will never affect your tax return.
While you have not paid income tax on your reverse mortgage, you are subject to estate tax if it is passed on to your heirs. The estate tax is based on the value of the home in relation to your adjusted gross income. For many people this means a substantial amount, so it is best to consult with a professional who can calculate this for you.
The second thing you should know is that you may be able to lower the taxes that you owe by selling your home. However, the amount you sell it for will affect the amount of tax you pay. To sell your home for less money than the mortgage you received, you may consider having your mortgage interest deferred.
Another thing to keep in mind is that you may not be able to use your reverse mortgage if you already owe money on the property. If you already owe more than the equity in the home, you may not be able to sell your home. If this is the case, you could consider refinancing the mortgage and use the extra money to help you pay off your debt.
Although you have been told that you may not be able to use your reverse mortgage in the future, this is not true. Your reverse mortgage is a benefit that is available to you in the future. However, you may want to sell your home while it is still under contract and use this equity to pay off existing debt.
There are several questions that come up when it comes to is reverse mortgage taxable. but with the proper knowledge, you can answer them without much trouble.
Is a reverse mortgage taxable? This is a difficult question to answer but one that you will need to answer at some point in time.
One way you can determine if it is taxable is if you are going to be borrowing against the equity in your home. If you are going to use the loan to pay off your existing debts, then this is probably not taxable since the loan is not going to be used to borrow against the equity.
Another way you can determine if it is taxable is if you are going to be receiving the loan for more than the equity in your home. if you are going to take out a loan to purchase another home. the equity in your home you will likely need to pay tax on that loan as well.
If you are not using the equity in your home to buy another home, but simply receiving a loan, you may be able to avoid paying taxes on the loan by making payments. This is something that can work for some people, but you will have to get expert advice from a tax professional.