How do reverse mortgages affect income tax, Social
Security and Medicare benefits?
If you take out a reverse mortgage, you don't have to
worry about the loan affecting your ability to collect Social
Security or Medicare benefits. (However, if you are receiving
Supplemental Security Income payments, you must spend the proceeds
from the reverse mortgage and not accumulate the payments.) Nor will
the mortgage have much effect on your income taxes. According to
"Wealth Enhancement & Preservation" (The Institute
Inc., Denver, Colo.), "Reverse mortgage advances do not affect
eligibility for Social Security and Medicare benefits and will not
affect SSI benefits as long as the recipient spends the advances
within the month they are received. The loan advances from a reverse
mortgage are not taxable, and the interest which is credited on a
reverse mortgage is not deductible for income tax purposes until it
is paid. This does not occur until all the reverse mortgage debt is paid."