Did You Know You Can Use a Reverse Mortgage to Reduce or Mitigate Your Taxable Income and Income Taxes?

FACT: A Reverse Mortgage can reduce or mitigate your income taxes in retirement by providing non-taxable cash flow, which helps you meet your spending needs without increasing your taxable income.

Funds from a Reverse Mortgage are considered loan proceeds, not income. The IRS does not treat loan advances (like those from a Reverse Mortgage) as taxable income. This means you can access home equity without triggering additional income taxes.

Other Valuable Income Tax-Reducing Considerations:

A. Reduces Need to Withdraw from Taxable Accounts Normally, pulling income from IRAs, 401(k)s, or pensions increases taxable income. If you instead use Reverse Mortgage funds during high-income years (or market downturns), you can delay or reduce taxable distributions.

B. Helps Manage Medicare Premiums & Tax on Social Security Medicare Part B & D premiums are based on your Modified Adjusted Gross Income (MAGI)—and so is the taxation of Social Security benefits. Keeping your income lower using Reverse Mortgage funds may prevent your Social Security from being taxed at a higher rate and keep you in a lower IRMAA bracket, saving on Medicare premiums.

C. Creates Strategic Roth Conversion Opportunities By using a Reverse Mortgage to meet living expenses, you might reduce other income and create space in lower tax brackets. This allows you to convert funds from a Traditional IRA to a Roth IRA at a lower tax rate. Over time, this reduces Required Minimum Distributions (RMDs) and future taxable income. (Always seek the advice of a tax professional.)

Disclaimer: The information provided is based upon education, solid knowledge, experience, and research; however, it should not be considered professional legal advice. Consult a legal professional with regard to your specific situation.