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Volume 9 - Opinions of Counsel SBEA No. 72

Opinions of Counsel index

Senior citizens exemption (income requirement) (reverse mortgages) - Banking Law, § 6-h; Real Property Law, § 280; Real Property Tax Law, § 467(3)(a):

The proceeds of a reverse mortgage do not constitute income for the purposes of section 467 of the RPTL. Upon investment of such proceeds, however, any interest or dividends from such investment would be considered to be income.

We have been asked how reverse mortgages should be treated for purposes of determining a senior citizen’s income eligibility for the senior citizens exemption Real Property Tax Law, §467). Income for purposes of RPTL, section 467(3)(a), is defined as:

social security and retirement benefits, interest, dividends, total gain from the sale or exchange of a capital asset which may be offset by a loss from the sale or exchange of a capital asset in the same income tax year, net rental income, salary or earnings, and net income from self-employment, but shall not include a return of capital, gifts or inheritances.

Reverse mortgages are authorized pursuant to Banking Law, section 6-h, and Real Property Law, section 280(1), the latter of which states that:

a reverse mortgage is a first mortgage loan in which loan proceeds are either advanced to the mortgagor or mortgagors in installments or are advanced for the purpose of the purchase of an annuity, based on the value of the real property securing the mortgage.

Reverse mortgages were created (L.1984, c.789) to benefit “senior citizens who have acquired wealth in the form of substantial equity in their homes.  Many senior citizens hold free and clear title to their homes, which in many cases, represents their primary asset. The reverse mortgage concept attempts to utilize this dormant asset...” (1984 N.Y.Legis.Ann. p.260). {*}

In our opinion, the proceeds of a reverse mortgage are a loan, and should not be considered as income for purposes of section 467. By the same token, monies used to repay a reverse mortgage may not be deducted from income (2 Op.Counsel SBEA No. 65).

If loan proceeds, in this case from a reverse mortgage, are invested, however, interest or dividends realized from such investment would constitute income (1 Op.Counsel SBEA Nos. 2, 48).

April 29, 1991

NOTE:  See also: L.2009, c.259.


{*}  This purpose is consistent with that of section 467 (added L.1966, c.616). “The bill thus provides a method for municipalities, by local action consistent with principles of home rule, to help elderly persons living on small fixed incomes to remain in their homes despite increases in real property taxes; especially taxes for school purposes” (1966 N.Y. Legis.Ann. p.346; also included in Governor Rockefeller’s approval message of chapter 616, reprinted at McKinney’s 1966 Session Laws of New York, p.3001).

Updated: