In certain specific cases, borrowing via a reverse mortgage, mortgage or HELOC and buy income-producing investments may make sense. That’s because the tax you pay on that investment income may be offset by the interest expense. This can considerably reduce your effective borrowing costs and magnify your returns.
Deducting interest is an advanced strategy. It only makes sense in specific circumstances. To be onside with the law, following the rules is imperative.
Your interest deductibility benefit depends on your marginal tax rate. For approximate tax rates, see this.
Just keep in mind, while debt (leverage) can maximize returns, it can also magnify losses if you choose the wrong (or higher risk) investments. So get solid advice from a professional before embarking on this strategy.
Important: This is general information, is not meant for every reader, and is not tax or investment advice. Seniors Equity is not an advisor on tax and investments. If you need guidance on this topic, consult with a licensed financial and tax advisor.