- AdministratorApril 11, 2022 at 9:23 am
I know somebody who has a reverse mortgage that they refinanced into another reverse mortgage to reduce their interest and annual MIP. The refinance was completed last year and they recently received a 1098 statement for all the interest and MIP that had accrued on the previous reverse mortgage over the the last 3-4 years. I was already aware that mortgage interest and MIP on a reverse mortgage were deductible on taxes, but only if the homeowner/borrower actually makes a payment against the mortgage balance. In this case, the mortgage interest and MIP were paid off by another reverse mortgage. The homeowner/borrower didn’t actually pay the mortgage interest and MIP out of their pocket, but it still appears to be deductible. Does that sound right? What feedback can you offer on this? Thanks!
Phil AGuestApril 12, 2022 at 10:32 am
I’m not a CPA but I know that the interest is ACCRUED but not paid while the rev mortgage is Active, so it’s not deductible. However, it would make sense for it to be deductible if/when rev mortgage is refinanced, since the ACCRUED interest IS deductible as a “lump sum” when that loan is paid off
- AdministratorApril 13, 2022 at 6:02 pm
This issue got me thinking as well about what happens when the last borrower passes away and the balance becomes due and payable. I guess the estate and/or heirs would get a pretty big tax deduction when the balance is paid at that point. Thanks for checking in, Phil!
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