Retirees who are trying to trim their tax bill should focus on the fact that the IRS taxes income. Money that you borrow can provide cash flow without raising your tax bill.

You might, for example, borrow against a home equity line of credit. As long as you itemize tax deductions on your federal return, the interest you pay probably will be deductible. Other possibilities include loans against your life insurance or your securities portfolio.

At the same time, keep your savings in vehicles that don’t generate much taxable income, such as growth stocks or tax-managed mutual funds. Use borrowed money for tax-free living expenses. Today’s low interest rates make such an approach more practical.

Of course, you must be careful not to borrow to excess. You might trigger margin calls on your securities or see your life insurance lapse. Also, heavy borrowing may lead to interest payments you can’t manage.

If you’re at least 62 with a home that’s not heavily mortgaged, you might consider taking out a reverse mortgage. You’ll get tax-free cash and no repayments are due until you die or move out of the house.

On the downside, these loans are expensive, with fees ranging up to $12,000 per transaction. Moreover, reverse mortgages aren’t for those eager to bequeath their home to heirs–most or even all of the home’s equity may be eaten up by the loan principal and interest.

Therefore, reverse mortgages work best for older Americans who need cash, who want to remain in their homes, and who have few other options. When the homeowner moves, sells the house or dies, the loan becomes due. If the house is held until death, the heirs may be able to take out a conventional mortgage, pay off the reverse mortgage, and go on living there.