Five Tax Questions on Reverse Mortgages, 529 Plans and Charitable Gifts

Five everyday money decisions can carry tax details that are easy to miss: using a reverse mortgage, paying for college abroad, accepting pet insurance through work, making large charitable gifts and deciding which tax records to keep. The answers below explain the rules described in the source and flag where timing or personal circumstances may matter.

Reverse mortgage payments are loan proceeds

Money received through a reverse mortgage on a primary home is treated as loan proceeds, so the payments aren’t taxable income under the rule described here. That can make the cash feel different from wages or retirement income at tax time, but the loan still has costs and obligations that should be understood before signing. More on reverse mortgages.

The interest paid later generally can’t be deducted on Schedule A of Form 1040. The reason given is that the borrowed money wasn’t used to buy, build or substantially improve the home securing the mortgage. The source links to the IRS pages for Schedule A and home improvements.

In practical terms, tax-free proceeds don’t mean tax-deductible interest. Anyone weighing this option should keep those two points separate when estimating the household impact.

529 funds may cover an eligible study-abroad program

A student attending a college in the United States may be able to use 529 plan money for a semester or two abroad through that school. The key conditions in this example are that the U.S. college qualifies for the federal student aid program and accepts the credits earned through the overseas program. Information about 529 plans is available here.

If a student instead enrolls full time at a college outside the United States, the foreign school itself must participate in the federal student aid program to qualify. The source notes that many foreign colleges do participate. That means a school’s location alone doesn’t settle the question; families need to check the school’s eligibility and, for a temporary program, confirm that credits will transfer back as expected.

Before paying tuition or other costs from the account, it’s sensible to confirm the school and the specific program meet the stated conditions. A study-abroad arrangement attached to an eligible home college is different from enrolling directly in a foreign university, so families should verify which situation applies.

Employer pet insurance is treated differently from health coverage

Employer-paid pet insurance is taxable income to the employee, unlike employer-paid health insurance for workers as described in the source. Most employers that offer pet coverage don’t subsidize it; employees who enroll generally pay through deductions from after-tax wages. More on pet insurance and health insurance.

So an employer benefit can make enrollment convenient without making the premiums tax-free. When comparing the plan with buying coverage elsewhere, employees can look at the payroll deduction and how it is treated, alongside the coverage itself.

Charitable deduction limits have a future change

For cash gifts, the source says itemizers may deduct contributions on Schedule A only up to 60% of adjusted gross income (AGI) in a year. Any excess can be carried forward for five years. The limit for donations of capital-gain property, including stocks, bonds and mutual fund shares, is generally 30% of AGI. See the source’s pages on the One Big Beautiful Bill and adjusted gross income.

A separate change starts with 2026 returns filed in 2027. Under the rule described, people who itemize can deduct charitable gifts only to the extent that their total donations exceed 0.5% of AGI reported on Form 1040. The source compares this threshold with the long-standing medical expense rule, under which deductible costs must exceed 7.5% of AGI. Details on charitable deductions and medical expenses are linked here.

For households that give substantial amounts, the timing matters: the 0.5% threshold applies to the specified 2026 tax year, while the 60% AGI limit for cash contributions is described as permanent. Keeping donation records and tracking the type of gift can help when preparing a return.

Keep records with an eye on future needs

The general recommendation in the source is to retain tax returns, Forms 1099 and other third-party information returns for at least three years from the due date of the return. That’s a baseline, not a signal to discard every document once three years have passed. Older records may still be useful, and some records may be discarded sooner depending on the document and circumstances.

Monthly brokerage statements need individual consideration; the source doesn’t give one universal retention period for them. Rather than treating every paper or file alike, review what information it contains and whether it supports a tax return or may be needed later. The linked guides explain how long to keep tax returns and records and how long to keep tax records.

These answers are general information, not individualized tax guidance. The practical takeaway is to check the conditions that apply to your own situation, especially for study-abroad expenses, large charitable gifts and records tied to older returns.