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IRS.gov Website

Frequently Asked Tax Questions

Other - For Senior Taxpayers

  1. Are the proceeds I receive from a reverse mortgage taxable to me?
  2. I exercised my rights to receive life insurance distributions before death. Are these proceeds taxable?
  3. I am over age 70½. How do I determine the amount I must withdraw each year from my IRA & 401(k) accounts to avoid a penalty?

Rev. date: 11/10/2015

Are the proceeds I receive from a reverse mortgage taxable to me?

No, the payments you receive from a reverse mortgage are not taxable. A reverse mortgage is a loan in which the lender is paying you, the borrower, loan proceeds (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.
Additional Information
Reverse Mortgages

Rev. date: 11/10/2015

I exercised my rights to receive life insurance distributions before death. Are these proceeds taxable?

If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy less any refunded premiums, rebates, dividends, or loans that you neither repaid nor previously included in your income. You should receive a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., showing the gross proceeds and the taxable part. Report these amounts on lines 16a and 16b of Form 1040, U.S. Individual Income Tax Return, or on lines 12a and 12b of Form 1040A, U.S. Individual Income Tax Return.

Rev. date: 11/10/2015

I am over age 70½. How do I determine the amount I must withdraw each year from my IRA & 401(k) accounts to avoid a penalty?

Generally, the required minimum distribution (RMD) must be figured separately for each account. You can calculate the RMD for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in Tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). Use:
You can use Worksheet 1-1. Figuring the Taxable Part of Your IRA Distribution, in Publication 590-B.
Note: If you have more than one such IRA or retirement plan account from which RMDs must be taken, you can total the required distributions for all the accounts and then satisfy the requirement by taking distributions from any one (or more) of the accounts.
For more information, see Publication 590-B for RMD on IRAs and Publication 575, Pension and Annuity Income, for RMD on 401(k) plans.