Question:   Are the amounts a taxpayer receives from a "reverse mortgage" taxable or non taxable income? I've looked in publications 525, 936, 530 and 17 and couldn't find any relevant information.

Answer:   Interest on a reverse mortgage loan that is added monthly to the outstanding loan balance as it accrues is neither includible in a cash method lender's gross income nor deductible by a cash method borrower at the time it is added.

• The primary purpose of a reverse mortgage loan is to enable elderly persons with limited incomes to remain in their homes.
• Repayment of the loan is due when the principal amount has been fully paid to the borrower (they receive monthly allotments),
• The residence that secures the loan is sold,
• The borrower dies, or
• The borrower ceases to use the home as the borrower's principal residence.