Your payout is tax free
Reverse Mortgages are 100% federally regulated. The department of Housing and Urban Development, or HUD, and the Federal Housing Administration, or FHA, has designed and regulated all HECM Reverse Mortgages. These are the most popular Reverse Mortgages.
Reverse mortgages are extremely flexible. You can receive a lump sum, a line of credit, or a monthly payment. You can also receive a combination of any of these methods. You can use the funds for any purpose and the funds are 100% tax free. So basically regardless of how much money you take out using a reverse mortgage you will never be taxed one penny on any of the proceeds that you withdraw.
