Reverse Mortgages and Roth Conversions
Paying the Tax Bill Without Selling Assets
JP Dauber · Licensed HECM Specialist
NMLS# 386298 · Published September 4, 2026
Why a Roth conversion can help
A Roth conversion moves money from a traditional IRA, where withdrawals are taxed, into a Roth IRA, where qualified withdrawals are tax-free and there are no required minimum distributions.
Done thoughtfully, conversions can lower lifetime taxes and leave heirs a tax-free inheritance. The catch is the tax bill in the year you convert.
The problem: paying the conversion tax
You owe ordinary income tax on the amount you convert. If you pay that tax out of the IRA itself, you shrink the amount that makes it into the Roth — and may trigger penalties if you are under the right age.
Selling taxable investments to pay the tax can create more capital gains, and selling in a down market locks in losses.
How a HECM line of credit fits
Reverse mortgage proceeds are loan proceeds, not income, so they are not taxable. Drawing from a HECM line of credit to pay the conversion tax lets the full converted amount land in the Roth.
You avoid selling investments and avoid pulling extra from the IRA just to cover taxes.
Key fact
Reverse mortgage proceeds aren't taxable income. Using a HECM line of credit to pay the tax on a Roth conversion keeps more of your retirement savings invested and lets the full converted balance grow tax-free in the Roth.
Timing and the bigger picture
Conversions are often spread across several lower-income years to stay in favorable tax brackets. A line of credit you can draw from each year pairs naturally with that multi-year approach.
It can also interact with Medicare premiums and other thresholds, which is why coordination matters.
Do this with a professional
This is a strategy to run with a tax advisor or financial planner — the right conversion amount depends on your brackets, other income, and goals. The reverse mortgage is the funding tool, not the tax advice.
Want me to coordinate with your advisor on the HECM side? Reach out and I will make the loan piece simple.
Keep reading
The complete guide
Reverse Mortgages for Financial Advisors →
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