Reverse Mortgage 1098

[johnd00]

I have a client who sold there home last year and moved out of state to be closer to family. She had a reverse mortgage on her home (CA) that had been in place for years. Once the home was sold there was no value to her at that point, but she did receive a 1098 with a substantial amount of interest paid showing in Box 1 of the form. Based on reading of the subject matter this is all deductible on the Schedule A, but I wanted to make sure that is correct since it will in essence wipe out all of her taxable income for 2025.

[George4Tacks]

What percentage was for home acquisition debt or improvement? 

IRS Pub 936

Reverse mortgages.

A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. With a reverse mortgage, you retain title to your home. Depending on the plan, your reverse mortgage becomes due, with interest, when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive isn't taxable. Generally, any interest (including original issue discount) accrued on a reverse mortgage is considered interest on home equity debt and isn’t deductible.