Posted by RickinVA on 1/2/09 5:45am
Msg #273303

Tax Question

For those pros out there: What is deductible, if anything, year after year when one
has a Reverse Mortgage? The borrower pays interest, but only after the sale of the
dwelling. (I know about taxes)

Rick

Reply by MW/VA on 1/2/09 7:01am
Msg #273305

From what I've been told there are no deductions. Expenses are deductible in the year in which they are paid--they aren't paying anything out. Also, RM's are not considered income for tax purposes, social security, etc.

Reply by sue_pa on 1/2/09 7:33am
Msg #273307

You give the same answer you give to 'regular' borrowers. "I've got no idea but when you have your taxes prepared, take this entire stack of paperwork with you and have your settlement sheet on the top of the pile. The accountant will know." and when they say that they do their own taxes you say with a huge smile, "Well if you don't know and you're your own tax expert, I surely don't know either".

PLEASE tell us this is for your personal information (although asking on this board surely isn't the way to gain correct tax advice - just look at the differences in the recent ss thread) and not to be given to your signers.

Reply by MW/VA on 1/2/09 1:53pm
Msg #273346

His question is general--no indication that he's advising the borrower.

Reply by PAW on 1/2/09 8:33am
Msg #273318

As Sue already stated, you shouldn't be advising the borrowers of tax implications unless you are a licensed mortgage broker or lender, or operating under a licensed broker or lender. However, for your own edification:

"A reverse mortgage may be tax-neutral. Money received from a reverse mortgage payout is not taxable income. The borrower continues to be liable for property taxes, for which he or she still qualifies for a tax deduction. A borrower with no existing mortgage will have no interest deduction to lose, but a borrower who refinances a standard mortgage with a reverse mortgage will lose the annual mortgage interest deduction. Since no interest payments are made, cash-basis taxpayers cannot take a current deduction for mortgage interest and other costs that the lender pays or accrues; that deduction potentially will be available only when the mortgage is paid off." (Source: American Institute of Certified Public Accountants, 2006 - "Going Forward With Reverse Mortgages" by Howard Godfrey and Edward Malmgren)

Reply by John_NorCal on 1/2/09 1:10pm
Msg #273331

I wouldn't be relying on mortgage brokers or lenders

for tax advice. They may be good at what they do, and they may in many cases have your interest at heart, but it's far better to get advice, especially about taxes, from a disinterested profressional.

Reply by PAW on 1/2/09 1:17pm
Msg #273333

Re: I wouldn't be relying on mortgage brokers or lenders

Any broker or lender worth their salt, should always advise the borrowers to seek tax professional assistance whenever a new mortgage is contracted. But, a broker or lender should also know the basic tax implications when presenting a new loan, especially a reverse mortgage, to a perspective borrower.

Reply by John_NorCal on 1/2/09 3:00pm
Msg #273354

Re: I wouldn't be relying on mortgage brokers or lenders

**Any broker or lender worth their salt, should always advise the borrowers to seek tax professional assistance **

Key word > "worth their salt." As a tax professional, enrolled agent, I have seen my share of clients come into my office having relied on advice given by an agent, either real estate or mortgage, that was faulty or misleading.

Reply by LKT/CA on 1/2/09 1:30pm
Msg #273335

<<<As Sue already stated, you shouldn't be advising the borrowers of tax implications unless you are a licensed mortgage broker or lender, or operating under a licensed broker or lender. However, for your own edification:>>>

OK......if you have the answer to a question and choose to share it, then do so. But no one needs anyone's lecture on what they should or should not do with information they receive. NOR do they care to be questioned about why they're asking. Either answer the question or don't answer it, period.

Reply by MW/VA on 1/2/09 1:52pm
Msg #273345

I agree with this completely. Choose to answer to question or not, don't get into "advising" what to do or not do with the information.