Reverse mortgage blog
Is a Reverse Mortgage Taxable? OAS & GIS in Canada (2026)
General information for Canadian homeowners, not personal financial, legal, or tax advice.
Key takeaways
- Reverse mortgage money is a loan, not income — it is not taxed, no tax slip is issued, and it does not reduce Old Age Security or the Guaranteed Income Supplement (Financial Consumer Agency of Canada).
- Old Age Security is only reduced when net income passes $93,454 (2025 income, affecting July 2026 to June 2027 payments) — and a reverse mortgage adds zero to that number (Government of Canada).
- The Guaranteed Income Supplement pays a single senior up to $1,123.17 a month when yearly income stays under $22,800. Every $2 of income from anywhere else — a pension, a RRIF withdrawal, interest from savings — lowers that payment by about $1 (Government of Canada).
- The detail most pages skip: the borrowed money is not income, but if you leave it sitting in a savings account, the interest it earns is. The Canada Revenue Agency's own example shows a senior with $500 of interest from a regular savings account having to repay part of their benefits (CRA, TFSA guide).
- How you take the money matters: money that arrives monthly and gets spent earns no interest along the way, while a large amount left sitting in the bank does — and every lender lets you choose monthly deposits, one lump sum, or a mix (FCAC).
Is a reverse mortgage taxable in Canada? No — the money is a loan, not income, so it is never taxed and it does not reduce Old Age Security or the Guaranteed Income Supplement.
That is the short answer, and it is where most pages stop. It deserves more than one line — because for homeowners who receive the Guaranteed Income Supplement, one detail matters far more than the loan itself: the money you borrow is never income, but what that money earns while sitting in a bank account can be. This page covers the plain answer, then the two government benefits one at a time, with the real numbers — each verified against Government of Canada and Canada Revenue Agency pages in July 2026.
Why is reverse mortgage money not taxable in Canada?
Because it is borrowed money. The Canada Revenue Agency taxes income — your wages, your pension, the interest your savings earn. A loan is not income: it is money you owe back, which is why nobody pays tax on a regular mortgage, a car loan, or a line of credit. A reverse mortgage is simply a mortgage with no required monthly mortgage payments, so the same rule applies. Canada’s federal consumer agency states it directly: with a reverse mortgage, “you don’t pay tax on the money you borrow” (Financial Consumer Agency of Canada).
No tax slip is issued, because there is nothing to report. The money does not appear on your tax return at all. In practice, most reverse mortgage files use the money first to pay off an existing mortgage and any high-interest debts — paying off a debt is not income either — and whatever is left arrives as tax-free cash. Roughly 60,000 Canadian households hold a reverse mortgage today (an estimate from average balances — the statistics page shows the math), and none of them received a tax bill for the money.
The contrast worth knowing is with registered savings. Money pulled from a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF) is taxable income in the year you take it. A RRIF goes further: once savings sit in one, a minimum amount must be paid out — and taxed — every year, whether the money is needed or not (Canada Revenue Agency). For some retirees, those withdrawals push Old Age Security into the recovery tax covered in the next section. Reverse mortgage money creates no such push, because it is never counted as income. For households choosing between drawing down savings and borrowing against the home, that difference is real money, and it is exactly the kind of numbers question a free estimate puts in front of you.
Does a reverse mortgage affect Old Age Security?
No — Old Age Security payments continue exactly as they were, because the government reduces OAS in only one situation — the recovery tax, often called the clawback — and it looks only at your net income. Borrowed money adds zero to net income. Take $50,000 or $250,000 from a reverse mortgage and the income number the government sees does not move at all (FCAC).
Here is how the recovery tax actually works, so the reassurance comes with numbers. OAS is only reduced when net world income passes a threshold, and the government then recovers 15 cents of OAS for every dollar above it (Government of Canada). The thresholds are generous:
| Income year | Income threshold | OAS payments affected |
|---|---|---|
| 2024 income | $90,997 | July 2025 to June 2026 |
| 2025 income | $93,454 | July 2026 to June 2027 |
The government’s own example: a senior with $100,000 of income in 2025 repays 15% of the $6,546 above the threshold — $981.90 for the year. OAS only disappears entirely above $152,062 of 2025 income (ages 65 to 74 — slightly higher for 75 and over). Most retired households never come near these numbers, and a reverse mortgage cannot move anyone toward them, because the borrowed money is not part of the calculation.
One qualifier belongs here, and it leads into the section that matters most. The loan itself can never reduce OAS — but if a large lump sum gets invested and starts producing income, that new investment income is real income like any other. Interest, dividends, and realized gains all land on the tax return whether the cash gets spent or not. For OAS, this only matters to households already earning near $93,454, which is rare. For the Guaranteed Income Supplement, the same detail matters at much lower incomes — and that is the part almost nobody explains.
Does a reverse mortgage affect the Guaranteed Income Supplement?
The money you borrow does not — that is definitive, from the same federal consumer page: this money “doesn’t affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting” (FCAC). A GIS recipient can take a reverse mortgage, pay off debts, and put room back in the monthly budget without losing a dollar of the supplement.
But GIS deserves a closer look than OAS, because GIS is income-tested from the very first dollar. The Guaranteed Income Supplement is a monthly benefit for lower-income seniors 65 and older, paid on top of OAS (you must be receiving OAS to get it). For the July to September 2026 quarter, a single senior can receive up to $1,123.17 a month when annual income (not counting OAS and GIS itself) stays under $22,800 — and a couple who both receive OAS can each get up to $676.09 when combined income stays under $30,096 (Government of Canada). The amount is set each year using the income from your previous year’s tax return.
The reduction rule is written right into the Old Age Security Act: the supplement is reduced by one dollar for every full two dollars of the income you receive from anywhere else (Old Age Security Act, s. 12). A company pension counts. A RRIF withdrawal counts. So does the interest a savings account pays you — and that last one is the reason this section exists. Every $2 that lands on your tax return costs you about $1 of GIS.
The two rules sit right beside each other. The reverse mortgage money itself never counts as income, no matter how much you borrow. But the interest that money earns while it sits in a savings account or a GIC does count, from the very first dollar. The Canada Revenue Agency makes exactly this point in its own guide, with an example of a retired senior earning $500 a year of interest in a regular savings account — income that must go on his return, where he “could have to repay some of his social benefits” (CRA, Tax-Free Savings Account guide).
One worked example: the same $150,000, two ways
Here is what that rule looks like in dollars, for a single senior on GIS with $150,000 available from a reverse mortgage:
| Taken as monthly deposits | Taken all at once and left in the bank | |
|---|---|---|
| How the money arrives | About $2,500 a month, spent as it arrives | $150,000 on day one |
| What sits in the bank earning interest | Almost nothing | $150,000 in a GIC at 4% (example rate) |
| Interest income on next year’s tax return | About $0 | $6,000 |
| Tax on the reverse mortgage money itself | $0 | $0 |
| GIS the following year | Unchanged | About $3,000 lower for the year — roughly $250 a month, at $1 less per full $2 of income |
Both columns are the same homeowner with the same $150,000 reverse mortgage. The borrowed money is never taxed in either column. The only difference is the interest the money earns while it sits in the bank, because interest is income even when the loan is not. (The exact GIS change depends on the rest of the household’s income, so treat the $3,000 as a close example, not the exact number for your own file.)
Now, something worth saying plainly: almost nobody actually does what the right-hand column describes. Very few people borrow against their home just to leave the money sitting in a savings account, and there is a second reason not to. With a reverse mortgage you only pay interest on the money you have actually taken, so a large amount sitting in the bank is costing you interest while it earns you very little in return. The usual file looks like the left column instead — the money pays off a mortgage and other debts on the day it arrives, and there is very little left sitting anywhere for this rule to touch.
Where it does come up is smaller and more ordinary than a plan to invest. Someone takes the full amount available because it feels safer to have it, or holds a large sum back for a renovation or a future care cost, and it sits in the bank for a year or two in the meantime. That is when the interest starts showing up on the tax return. The good news is that this is completely avoidable, and the next section covers how.
Receiving GIS, or close to qualifying?
A free, no-obligation estimate shows what your home would qualify for — and deciding how the money should reach you is part of the same conversation. No cost, and no impact on your credit.
Get my free estimateHow does the way you take reverse mortgage money change your GIS?
Every Canadian reverse mortgage lender offers options for when and how you receive the money — one lump sum, scheduled monthly deposits, or a mix (FCAC). Many borrowers treat that choice as an afterthought. For a GIS household, it is the decision that matters most:
Monthly deposits that get spent create no investment income. Money that arrives as a $2,500 deposit and goes out on groceries, property taxes, and bills never sits anywhere long enough to earn interest. Nothing lands on the tax return, so GIS does not change. A second benefit: interest is only charged on money actually taken, so drawing the money gradually also keeps the loan balance growing more slowly. How the interest adds up over time is covered in how a reverse mortgage works in Canada.
A lump sum that gets used right away is fine too. When the money pays off an existing mortgage, clears high-interest cards, or funds the roof and the new furnace, it is spent rather than sitting in an account. The GIS math above only applies when a large amount stays in the bank for months or years “just in case.”
Where the money sits matters too. Canada’s tax rules are explicit that income earned inside a Tax-Free Savings Account (TFSA) does not reduce federal income-tested benefits: OAS and GIS “will not be reduced as a result of the income you earn in your TFSA or the amount you withdraw from your TFSA” (CRA). TFSA contribution room is limited and personal, so whether that route fits any one household is a conversation for your own accountant or financial planner — but the published rule is worth knowing before any lump sum lands in an ordinary savings account.
Model the draw-amount side of the decision here — your home’s value, the youngest borrower’s age, and the funds you actually need — and see the balance and remaining equity over time:
Here's What Happens to Your Equity
Adjust the sliders below to see how your equity can change over time.
Need more than this estimate?In some situations we can structure additional financing to unlock more of your equity — contact us to see if it fits your situation.
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Your 15-Year Forecast
In 15 years, your home is projected to be worth $1,935,282 (at 4.5% growth). Even with the growing loan balance, you would still have$1,288,355in remaining equity!
*Disclaimer: These projections are for illustration purposes only and should not be considered financial advice. Projections assume 4.5% annual appreciation and 6.44% interest rate. Actual results may vary based on market conditions and individual circumstances.
Your 15-Year Forecast
In 15 years, your home is projected to be worth $1,935,282 (at 4.5% growth). Even with the growing loan balance, you would still have$1,288,355in remaining equity!
This calculator is for illustration only. Your real numbers depend on your age, lender, rate, and home value — which is exactly what a free estimate works out for you.
How does a broker set the money up so your benefits are not affected?
Everything above comes down to one decision, and it is made before the mortgage is arranged: how the money should reach you. That is part of what a broker sets up when putting the file together — which lender’s monthly-deposit program suits your budget, what minimum amount each lender requires you to take on the first day, and how the rest stays available to draw later instead of sitting in a bank account earning taxable interest. The four Canadian lenders handle scheduled deposits differently, and for a household receiving the Guaranteed Income Supplement, those differences can matter more than a small difference in the rate.
None of that costs you anything. The lender pays the broker, so comparing all four lenders and setting the payments up the right way is free to the homeowner. It also does not end on the day the mortgage funds — a broker stays your advisor for the life of the mortgage, re-running the numbers at no cost when your plans, or your benefits, change.
The wider decision — how much to take, in what form, and what it means for taxes, benefits, and the estate — is what the free guide below walks through step by step.
Free Guide:The Canadian Reverse Mortgage Guide
- ✓How much tax-free cash you could unlock — and what moves the number
- ✓The real costs, rates, and fees — nothing buried in fine print
- ✓How the lenders (CHIP, Equitable Bank, Home Trust, Bloom) really compare
- ✓When a reverse mortgage is the wrong choice
Simply enter your info below and a PDF copy will instantly be sent right to your inbox.
Is reverse mortgage interest tax deductible?
Usually no — the Canada Revenue Agency only allows interest to be deducted when the borrowed money is used to try to earn investment income, such as interest or dividends (CRA, line 22100). Money used to pay off your own mortgage, cover living costs, renovate, or help family is personal use, so the interest on it is not deductible. That describes the vast majority of reverse mortgage files.
Two more details of the same rule are worth knowing: interest on money borrowed to contribute to a TFSA or an RRSP is not deductible, and if an investment can only ever produce capital gains, the interest cannot be claimed either. Some pages present “invest your reverse mortgage and deduct the interest” as a simple win — the rule is real, but it is narrow, it must be set up correctly, and for a GIS household it works directly against the section above: a tax deduction is worth less than the GIS the same plan can cost. Anyone weighing that strategy should price it with their own accountant first, with the full benefits math included.
When the home is eventually sold, there is normally no tax bill waiting there either — a principal residence is generally exempt from capital gains tax, and a reverse mortgage on title does not change that. The loan is repaid from the sale, and everything left belongs to you or your estate. How that repayment unfolds — timelines, the estate’s options, what heirs actually sign — is its own topic, covered in what happens to a reverse mortgage when you die. And if the move out of the home is into a care facility, the money side of that transition is covered in reverse mortgages and long-term care.
For the bigger question sitting behind all of this — whether a reverse mortgage is the right tool at all — the balanced case both ways lives in the pros and cons of a reverse mortgage in Canada, the specific situations where it works (and the ones where it does not) in is a reverse mortgage a good idea, and the Ontario-specific picture in the complete Ontario reverse mortgage guide.
The key numbers on this page at a glance, as of the July to September 2026 benefit quarter:
Frequently asked questions
Is money from a reverse mortgage considered taxable income in Canada?
No. It is borrowed money, the same as a regular mortgage or a line of credit, so it is not income and it is not taxed. It does not appear anywhere on your tax return, and it does not change your eligibility for income-tested benefits like the Guaranteed Income Supplement.
Do you get a tax slip for reverse mortgage money?
No. There is no T-slip of any kind, because nothing about the money is income. In February, your tax paperwork looks exactly the way it did the year before — the reverse mortgage simply is not part of it.
Does a reverse mortgage affect CPP payments?
No. Canada Pension Plan payments are based on what you contributed during your working years — they are not income-tested, so no loan can change them. Old Age Security is only reduced above the recovery-tax threshold ($93,454 of 2025 net income), and reverse mortgage money never adds to that number.
How soon could GIS change if reverse mortgage money sits in the bank?
The following year. The Guaranteed Income Supplement is set using your income from the previous year's tax return, so interest earned this year shows up in next year's GIS amount, not right away. That delay is why it is worth deciding how the money should come to you before it arrives rather than after.
Is reverse mortgage interest tax deductible in Canada?
Usually no. Interest is only deductible when borrowed money is used to try to earn investment income, such as interest or dividends, under the Canada Revenue Agency's rules. Money used to pay off a mortgage, cover living costs, or help family is personal use, so the interest is not deductible. An accountant should confirm any plan that depends on the deduction.
Is there tax when the home is eventually sold?
Generally no. A home that qualifies as your principal residence is usually exempt from capital gains tax when it sells, and having a reverse mortgage registered on it does not change that. The loan is simply repaid out of the money from the sale, and whatever is left belongs to you or your estate.
See your own tax-free number
A free, no-obligation estimate shows what your age and home would qualify for across every Canadian reverse mortgage lender — with no impact on your credit.
Get my free estimate About the author
Richard Hopkins
Licensed Mortgage Broker · M16000896
Richard has worked in the mortgage business since 2013 — first as a mortgage agent, today a licensed mortgage broker — and leads the reverse mortgage practice at Homestead Financial — Dominion Lending Centres, an FSRA-licensed Ontario brokerage (#11711) with roots in the industry since 1999 and more than 2,500 mortgages funded. More about Richard →
This article is general information for Canadian homeowners, not personal financial, legal, or tax advice. Everyone's situation is different — please get advice on your own numbers before making a decision.