People ask two questions right away: will this be taxed, and will it cut my OAS or GIS? Here is what is generally true, and where you need your own tax advice.
Is reverse mortgage money taxable?
Lenders generally treat it as borrowed money, not income, and the federal Financial Consumer Agency of Canada says it does not affect Old Age Security or Guaranteed Income Supplement benefits. That is because you are taking out a loan against an asset you already own, not earning new income.
General information only. Your own tax and benefits outcome depends on your situation, so confirm with your tax advisor or accountant.
Where it can get more complicated
- If you invest the money. Interest, dividends or gains you earn on invested proceeds can be taxable, and for some people investment income can affect income-tested benefits like GIS.
- Interest deductibility. Interest on borrowed money is generally only deductible when the money is used to earn income from a business or property. Interest on a reverse mortgage used for living expenses usually is not.
- Gifts to family. Giving money to your kids has its own tax and legal questions, especially if it is invested or used to buy property.
- Your estate. The loan is repaid from the estate, which reduces what is left. Your accountant can explain how that fits with your estate plan.
Using a reverse mortgage instead of RRIF withdrawals
Some people use a reverse mortgage to avoid larger taxable withdrawals from a RRIF or other investments. Whether that makes sense depends on your tax bracket, your benefits, how long the loan would run and what the interest costs. That is a conversation to have with your accountant and financial advisor, with real numbers in front of you.
Questions people ask
Will a reverse mortgage reduce my OAS or GIS?
The Financial Consumer Agency of Canada says reverse mortgage money does not affect OAS or GIS. Income you earn by investing the money could be different, so check with your tax advisor.
Do I pay tax on reverse mortgage money?
Lenders generally treat it as a loan, not income. Confirm your own situation with a tax advisor.
Can I deduct the interest?
Usually only if the money is used to earn income from a business or property. For everyday living costs it generally is not deductible. Ask your accountant.
About the author
Matt Blake is a licensed mortgage broker in British Columbia with BRX Mortgage Inc. He helps homeowners 55 and over, and their families, compare reverse mortgages with HELOCs, selling and downsizing, and he will tell you straight when a reverse mortgage is the wrong move.
Licence MB600487 · BRX Mortgage Inc., brokerage licence X301291 · Last reviewed October 2026
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