Reverse mortgage tax: will it touch your OAS or GIS?

Short answer: A reverse mortgage doesn't create tax in Canada when you receive the money. It's a loan, not income: FCAC describes it as converting part of your home equity into tax-free money, and says the money doesn't affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting ^[1]. What can still matter for tax is what you do with the money afterwards, and how the loan is repaid when the home is sold.

This guide covers what changes and what doesn't, how a reverse mortgage compares with taking more out of a RRIF, and two worked examples. If you're weighing a reverse mortgage, our reverse mortgage page explains how we compare options across lenders.

Is reverse mortgage money taxable?

No. You're borrowing against your home, so the money isn't income. FCAC lists "you don't pay tax on the money you borrow" as one of the pros of a reverse mortgage ^[1]. That holds whether you take a lump sum, part up front and the rest over time, or regular payments, which FCAC says are typically $1,000 a month or $3,000 every three months ^[1].

You also don't make regular payments. The lender adds interest to the balance, and the loan is repaid when you sell, move out, the last borrower dies or you default ^[1].

Does a reverse mortgage affect OAS or GIS?

FCAC says the money "doesn't affect the Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting" ^[1]. Here's why that matters:

• OAS recovery tax ("clawback"). If your net income is above a threshold, you repay 15% of the excess. The threshold is $93,454 for 2025 income and an estimated $95,323 for 2026 income ^[2].
• GIS is income-tested. It's recalculated each July based on the previous year's income and, generally, is reduced by $1 for every $2 of income ^[3]. A single person qualifies only with annual income under $23,112 ^[4].

Because reverse mortgage money isn't income, it doesn't push you toward either limit.

Reverse mortgage vs RRIF withdrawals: what changes

Sources as cited. This compares how each is treated, not which is better for you.

Thinking about a reverse mortgage for retirement cash flow? A licensed 8Twelve agent can show what you could qualify for and the full cost over time, comparing 65+ lenders at no cost to you, OAC. Explore reverse mortgage options

Worked example 1: avoiding the OAS recovery tax

Illustration: you're 70, single, with net income of about $85,000 in 2026 from a pension, CPP, OAS and your RRIF minimum. You need $15,000 for a new roof.

• Extra RRIF withdrawal: your net income rises to about $100,000. Using the estimated 2026 threshold of $95,323, the OAS recovery tax is 15% of $4,677, or about $702 ^[2], on top of income tax on the $15,000.
• Reverse mortgage draw: your net income stays at about $85,000, so no recovery tax and no extra income tax on the $15,000 ^{[1] [2]}.

The trade-off: the $15,000 draw grows with interest. At an assumed 7% rate, it would be about $21,200 after 5 years and $29,800 after 10 years if you made no payments. Some lenders also charge set-up, appraisal and legal fees ^[1].

Illustrative only. The rate is an assumption, not a quote; recovery tax per the Canada.ca formula; compounding semi-annually, calculated in Python.

Worked example 2: protecting GIS

Illustration: you're single, receive GIS, and have about $12,000 a year of income besides OAS. You need $6,000 for a car repair and dental work.

• From your RRIF: under the general rule of $1 less GIS for every $2 of income, your GIS could drop by roughly $3,000 over the following July-to-June year, about $250 a month ^[3].
• From a reverse mortgage or a TFSA: neither counts as income for GIS ^{[1] [6]}.

In practice, many GIS recipients won't need or qualify for a large reverse mortgage, and the minimum first draw is often around $20,000 to $25,000 ^[1]. A TFSA or a small HELOC may be simpler for a one-time $6,000 need. Service Canada calculates your actual GIS.

Where tax can still come in

• Investing the money. If you invest reverse mortgage money in a regular (non-registered) account, the interest, dividends or capital gains it earns are taxable and count as income for OAS and GIS. Income earned inside a TFSA doesn't affect those benefits ^[6].
• Selling the home or the estate. When you sell, or are considered to have sold, your home, the gain is usually tax-free if it was your principal residence for every year you owned it, but the sale must be reported and the home designated ^[7]. For a deceased person, the legal representative makes that designation ^[7].
• Interest isn't a deduction for everyday spending. Using the money for living costs or home repairs doesn't create a tax deduction for the interest. If you plan to borrow to invest, get tax advice first; the rules depend on how the money is used.

What a reverse mortgage changes for your estate

The tax picture may be simple, but the estate picture needs a conversation. The balance, including all the interest, is repaid from the sale of the home, and your estate usually has a limited time to repay. FCAC notes that settling an estate can take longer than the time allowed to repay, and there may be less to leave to your beneficiaries ^[1].

1. Ask how long the estate has to repay and what happens if a sale takes longer.
2. Run the balance at 5, 10 and 15 years with your broker, not just year one.
3. Talk it through with family and, ideally, a financial advisor or lawyer; FCAC suggests both ^[1]. Some provinces require independent legal advice ^[1].

When a reverse mortgage may not be the right tool

• If you only need a small amount once. A TFSA withdrawal or a small HELOC may cost less; FCAC suggests comparing other options first ^[1].
• If moving is likely anyway. Our reverse mortgage vs downsizing guide puts numbers on both.
• If you're not sure you qualify. Check age, home type and title rules in our reverse mortgage requirements guide.

From our desk: the clients who are happiest with a reverse mortgage years later are the ones who planned draws around their RRIF and benefits from the start, rather than using it as a last-minute fix.

A reverse mortgage won't add to your tax bill or cut your OAS or GIS, which is a real advantage over large RRIF withdrawals. The cost shows up instead as interest that compounds on your home equity. Plan your draws around your income and benefits, and look at the balance years out, not just today.

See the bigger picture: compare a reverse mortgage with downsizing in our reverse mortgage vs downsizing guide, or call a licensed agent through our contact page.

This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. "Best rates" means the most suitable options available for your situation, not a guarantee of the lowest rate. Example rates and payments are for illustration only, as of October 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.

This article is general information, not tax advice; speak with a tax professional about your situation. Benefit thresholds and examples are as of October 29, 2026 and checked against FCAC, Canada.ca, ESDC and CRA sources that day; the 2026 OAS threshold is a Government of Canada estimate until it's finalized. Reverse mortgage rates, fees, minimum draws and repayment terms vary by lender and are available OAC. 8Twelve does not lend or fund mortgages; we arrange reverse mortgages with third-party lenders.