Message Font: Serif | Sans-Serif
No. of Recommendations: 2
I've never had to deal with one, so I'm just thinking out loud here.

It seems to me that most reverse mortgages allow the homeowner to continue occupying their home until some trigger event such as moving to a nursing home or assisted living, or dying.

So if the client was continuing to live in the house under the typical reverse mortgage terms, there would be nothing to report on her final return, as it would be her death that triggers the end of the reverse mortgage. Any impact would then end up on the estate's income tax return rather than a final 1040.

The alternative is that there was some triggering event before the client passed away. Then I think you'd use the normal home sale routine. If the house went directly to the mortgage holder, I'd guess the sale price would be the amount of the reverse mortgage. Somewhat like a foreclosure.

The interest isn't being paid, so I don't think there's mortgage interest deduction. Unless adding the interest to the loan balance counts as paying the interest. But that typically doesn't work for a negative amortization loan, so I don't see how it would work for a reverse mortgage.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.