Ask the Expert: Pawning for home repairs

I receive a property tax reduction because of my age and income. My house needs many repairs. I'm considering pawning my jewelry to pay for them. If I don't redeem it, will this loan be income that could affect my tax reduction?

Maybe. If so, you could reapply for the reduction next year. But the real problem is that pawning your jewelry probably won't raise enough for home repairs. Pawn transactions are small-dollar loans; the amount you receive is only a fraction of a pawned asset's market value.

A pawn ticket states the loan amount, interest and fees, maturity date, and the total you must pay to redeem the collateral. If you don't redeem your jewelry by the maturity date, you've sold it to the pawnbroker for the cash he paid you, says Jeffrey Pretsfelder, a Thomson Reuters tax analyst. If you received an amount greater than you originally paid for the jewelry, you have a taxable profit. The pawnbroker doesn't report the transaction to the IRS, says Pretsfelder. It's up to you to calculate whether you have a taxable gain and, if so, to report it.

A reverse mortgage loan is one alternative that would generate more money than pawning your jewelry, and wouldn't affect your tax reduction. Other potential solutions depend on your income and location. "Some towns in Nassau County offer interest-free loans for home repairs. The loan isn't due until you die or sell the house," says Joe Mazza, a financial counselor at Family and Children's Association. "And some organizations, like Rebuilding Together, do home repairs for free."

The bottom line Explore all your financial options as a senior citizen.

For more information Family and Children's Association at 516-485-3425 and the Suffolk Department of Aging at 631-853-8200 offer counseling.