Is a reverse mortgage taxable, and does it affect OAS or GIS?
Reverse-mortgage money is a loan, so it isn't taxable income and doesn't reduce Old Age Security or the Guaranteed Income Supplement, according to HomeEquity Bank. Interest isn't tax-deductible unless you borrow to invest. Income you earn from investing the money may be taxable.
Figures as of November 1, 2026.No and no. The Financial Consumer Agency of Canada says you don't pay tax on money borrowed through a reverse mortgage and that it doesn't affect Old Age Security or the Guaranteed Income Supplement, because it's a loan, not income. What can affect your taxes is what you do with it: income earned by investing it is taxable, and interest may be deductible only if the money is used to earn investment income.
Why it isn't income
Money you borrow has to be repaid, so tax law doesn't treat it as income. The FCAC states it plainly: you don't pay tax on the money you borrow, and it doesn't affect OAS or GIS. HomeEquity Bank says the same in its product pages, and Bloom says the proceeds are tax-free and don't affect OAS. EQ Bank doesn't give tax advice and suggests a financial advisor.
This is one real advantage over selling investments or drawing extra from a RRIF: a $20,000 RRIF withdrawal is taxable income and can trigger the OAS recovery tax or reduce GIS; a $20,000 reverse-mortgage advance isn't.
If you invest the money
Interest, dividends and capital gains you earn by investing reverse-mortgage money are taxable like any investment income, and they count toward income-tested benefits. HomeEquity Bank notes that interest may be deductible if the funds were used for investment purposes. Borrowing at 6.49% to invest is a bet that investments beat that rate after tax; most retirees shouldn't take it.
When the home is sold
The sale of your principal residence is usually sheltered by the principal residence exemption. The reverse mortgage doesn't change that; it's simply repaid from the proceeds.
At death
The loan becomes due and is repaid from the estate, usually by selling the home. The interest that built up isn't a deduction against the estate's income in the usual case. Probate rules and fees vary by province; your lawyer or notary can tell you what applies.
Do reverse-mortgage advances count as income?
| Source | Added to taxable income | Counts for OAS and GIS income tests |
|---|---|---|
| RRIF withdrawal | $12,000 | Yes |
| Reverse-mortgage advances | $0 | No (loan proceeds, HomeEquity Bank) |
Because GIS falls as income rises, a low-income senior who draws money from a reverse mortgage instead of a RRIF may keep more of the supplement. The trade-off is interest on the loan. Ask an accountant to compare your own case.
Is reverse-mortgage interest tax-deductible?
Not when the money is spent on living costs, repairs or gifts. If you invest the money, ask an accountant whether the interest can be deducted; the rules depend on how the money is used and traced.
What about tax when the home is sold?
A principal residence is normally sheltered from capital gains tax. The loan is repaid from the sale proceeds; the reverse mortgage doesn't create a separate tax bill.
What does change, tax-wise?
Your income stays the same, but your estate is smaller: the loan and its interest come out of the sale before your heirs inherit. If you invest some of the money, the investment income is taxable in the usual way. If you use the money to make gifts, ask your lawyer how they fit your will.
Benefits that depend on income, such as GIS and some provincial seniors' programs, look at taxable income; reverse-mortgage advances aren't part of it, according to HomeEquity Bank. Confirm with Service Canada or your provincial program if your benefits are close to a threshold.
| Advances | $1,000 a monthplus $20,000 up front |
|---|---|
| Rate | 7.36% on advances |
| Received over 10 years | $140,000 |
| Added to taxable income | $0loan proceeds |
| Owed at 80 | $223,193 |
| Effect on OAS and GIS | noneHomeEquity Bank; confirm your situation with the CRA |
Open this example in the calculator →Computed by our engine with the lender terms and rules on the methodology page.Computed November 1, 2026.
What this means for you
For someone on GIS, tax-free advances can be worth more than the same money from a RRIF withdrawal, which counts as income. Ask an accountant if you plan to invest the money.
Frequently asked questions
Will a reverse mortgage reduce my GIS?
No. GIS is income-tested and reverse-mortgage advances aren't income. Interest or dividends from investing the money would count as income in later years.
Can I deduct reverse mortgage interest?
HomeEquity Bank says that if the money was used for investment purposes, you may be able to claim all or part of the interest. Interest on money spent on living costs isn't deductible. Ask a tax professional.
Primary sources
- Financial Consumer Agency of Canada — Reverse mortgages (effective October 15, 2025). Checked .
- HomeEquity Bank — CHIP Reverse Mortgage (tax-free, OAS and GIS). Checked .
- HomeEquity Bank — Client FAQs (repayment, estate, default). Checked .
- EQ Bank (Equitable Bank) — EQ Bank Reverse Mortgage. Checked .
- Bloom Finance Company — FAQs. Checked .