Whether or not it makes sense to itemize deductions is based on the

amount of the standard deduction, not the amount of income.

I know of nothing in the law that prevents a qualified mortgage loan

from being written with negative amortization (interest is earned but

unpaid and increases the balance of the loan by the accrued amount) for

a set number of years and the payments increasing in the remaining years

of the loan to pay off the interest and principal.

I agree that negative amortization is not a problem, but what about the

second part of the question -- can he still make payments during the

interest accrual (negative amortization) period and simply claim that

they are 100% principal? For example, suppose his first payment under a

normal amortization schedule (equal monthly payments) would be $20

principal plus $800 interest, total $820. If he makes a $20 payment, it

makes sense that would be principal, but what if he makes a $520

payment? Can that all be considered principal? If so, then he has a

net $300 increase in principal ($800 interest added to principal less

$500 payment).

When the loan is eventually paid off, will he be able to deduct the full

$800 as mortgage interest? This seems like a "too good to be true"

method for shifting deductions into future years. On the other hand, a

reverse mortgage does allow for deferred deduction of interest, but no

current payments are made, only a balloon payment when the property is

disposed.

I had a bank mortgage once that provided for negative amortization, but

with each payment I was only credited for the normal principal amount,

the rest went to (partial) interest.

Also, not asked, but I wonder whether the lender in this case would have

to report interest income as it accrued, or only at the end of the loan,

when it is paid?