by Meagan Bulloch
The ABLE Act amends Section 529 of the IRS Code of 1986 to create tax-advantage savings accounts for individuals with disabilities. The ABLE Act will provide individuals with disabilities the same types of flexible savings tools that all other American have through college savings accounts, health savings accounts and individual retirement accounts. Most importantly this Act will prevent money saved through 529-ABLE accounts from counting against an individual’s eligibility for federal benefits programs.
As of December 19, 2014 this was signed into law by President Barack Obama.
What you should know (Adapted from NDSS):
- 529-ABLE accounts are “tax-advantage” savings accounts for individuals with disabilities and their families. Income earned by these accounts will not be taxed. Also the money will not be considered an asset when determining eligibility for government supported benefits.
- Who is eligible – Any individual with significant disabilities with an age of onset before 26 years of age is eligible. Eligible individuals can be over the age of 26, but must have documentation of disability that indicates age of onset before the age of 26.
- How much money can be saved – Under current tax law, an individual can contribute a maximum of $14,000 into an ABLE account and not be subject to gift taxes. The total limit over time that can be made into an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. The first $100,000 in ABLE accounts will be exempt from the SSI $2,000 individual resource limit. If the ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits, but would continue to be eligible for Medicaid.
- What expenses qualify – A “qualified disability expense” is considered an expense incurred as a result of the beneficiary living with their disability. These would include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be developed in 2015 by the Treasury Department.
- Can I have more than one ABLE account – No, the Act limits the opportunity to one ABLE account per eligible individual.
- How is an ABLE account different from other options – ABLE accounts allow more choice and control for the beneficiary and their families. The cost of opening an account will be considerably less than setting up either a Special Needs Trust or Pooled Income Trust. The ABLE account will also be less complicated to set up and owners will have the ability to control their funds. This new approach also offers individuals living with a disability the ability to work and contribute to their own support and save for their own future with fear of losing necessary support and services.
Meagan Bulloch ([email protected]) is an audit manager at Langdon & Company LLP focused primarily on non-profit clients.