The Strongman Brothers: A High-Wire Act with HELOC & HECM

Disclosure: This post contains affiliate links. If you buy through them, Deep Dive AI may earn a small commission at no extra cost to you. Thanks for supporting the work!

The Strongman Brothers: A High-Wire Act with HELOC & HECM

Welcome back, ladies and gentlemen! Our Magician showed the finesse of using Roth and HSA funds that are invisible to the taxman. But what if your biggest strength is locked inside your house? Enter the Strongman Brothers—HELOC and HECM—masters at turning home equity into spendable cash without inflating your MAGI.

Act I: Meet HELOC, the Flexible Lifter

A Home Equity Line of Credit (HELOC) lets you borrow against your home’s equity as needed. HELOC draws are loan proceeds, not income—so they don’t increase taxable income or MAGI. (You still must repay them.) Interest is only deductible if the money is used to buy, build, or substantially improve the home securing the loan, per IRS rules. IRS Pub 936

Act II: Meet HECM, the Senior Powerhouse

A Home Equity Conversion Mortgage (HECM) (reverse mortgage) is available to homeowners 62+. Proceeds can come as a lump sum, monthly advances, or a line of credit. HECM proceeds are also loan advances, not income, and aren’t taxable. IRS FAQ • CFPB overview

Act III: The Bridge Strategy — A Worked Example

• Setup (age 62): You can keep MAGI low enough for Healthy Michigan Plan/ACA savings. You need ~$30k/yr for expenses and want ~$20k of home repairs.
• Years 62–64: Open a HELOC and draw ~$30k/yr for living costs (loan proceeds, not income) plus $20k for repairs. MAGI stays low; health coverage remains affordable. HELOC balance ≈ $110k (plus interest) by 65.
• Years 65–70: Now on Medicare, you repay gradually from your 401(k) to avoid a one-year tax spike. Example: ~$18,333/yr (plus interest) for six years. Watch for possible first-tier Medicare IRMAA effects if income climbs.

Trade-off: You’ll likely pay more total interest, but you avoid a single giant taxable distribution.

Act IV: The Interest Deduction, Split Correctly

• Repairs/Improvements (potentially deductible): Interest on the portion used to substantially improve the home (the $20k) may be deductible under Pub 936, subject to overall mortgage-interest limits/caps.
• Living Costs (not deductible): Interest on the ~$90k used for groceries/utilities is not deductible. Pub 936 PDF

Encore: Assets, Eligibility & Cash-Flow Discipline

Healthy Michigan Plan (HMP): For the MAGI-based Medicaid categories (including HMP), there is no asset test. Eligibility is determined by MAGI (generally ≤133% FPL, ≈138% with the 5% disregard). MDHHS BEM 137 • MDHHS BEM 400

Non-MAGI/SSI-related categories: Some Medicaid programs do have asset limits. For those, large cash balances can matter. Confirm your category with MDHHS before adopting any “draw, hold, and repay” plan. BEM 400

Good practice either way: Time HELOC/HECM draws to needs; avoid parking large sums; keep meticulous records (what each draw funded) so any interest deductions are clearly documented.

---

Suggested Tools & Guides

• Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes
• Brother DS-640 Compact Mobile Document Scanner
• SentrySafe HD4100 Fire/Water Document Box
• Clever Fox Budget Planner
• iHealth Track Smart Upper-Arm BP Monitor

---

Read the full series:

1. Part 1 — The Tightrope: What an Extra $10,000 Does to Your Michigan Benefits
2. Part 2 — The Magician’s Hat: How Roth & HSA Tricks Can Lower Your Income
3. Part 3 — The Strongman Brothers: A High-Wire Act with HELOC & HECM
4. Part 4 — The Full Circus: Stacking Michigan Benefits for Maximum Value
5. Finale — Build the Tent: How a Michigan C-Corp Can Tame Your Income

---

Enjoyed this? Subscribe on YouTube and Spotify. Grab merch at our store.

Sources

1. IRS Publication 936 — Home Mortgage Interest Deduction (see home-equity/HELOC interest use test)
2. IRS FAQ — Are reverse mortgage (HECM) payments taxable?
3. CFPB — Reverse mortgage loans (HECM) overview
4. CFPB — HELOC brochure (how HELOCs work/risks)
5. MDHHS BEM 137 — Healthy Michigan Plan (no asset test; MAGI ≤133% FPL)
6. MDHHS BEM 400 — MAGI-related MA categories (no asset test for MAGI categories; contrasts with SSI-related)
7. HealthCare.gov — MAGI definition