If you are disabled, and your disability occurred before you were 26 years old, you may be familiar with ABLE accounts that have been around since 2014. ABLE accounts allow people with disabilities and their families to save up to $15,000 for 2018 to use for disability-related expenses. These type of accounts can be a lifesaver.
Many Federal and State programs, such as Supplemental Security Income (SSI) or Medicaid, disallow other kinds of savings accounts in excess of $2,000. Having an ABLE account would not jeopardize the eligibility of an individual or family to receive mandated benefits.
Setting up an ABLE account for yourself or someone else can be done with a number of financial institutions. ABLE accounts work very much like 529 savings plans, meaning, the funds you contribute are not tax deductible, but the earnings on those funds are not taxed if used to pay for qualified disability expenses. However, an individual can be the beneficiary for only one ABLE account at a time, so you can’t open multiple accounts and make $15,000 contributions to each of them.
Some significant changes have been made to the ABLE plan under tax reform. Here are a few key points:
First, for 2018, up to $15,000 a year can be rolled from a family member’s 529 plan or disabled beneficiary’s 529 plan into an ABLE account. Rollovers from the previous plan count toward the annual $15,000 limit of the ABLE plan. Previously, funds in a 529 plan had to be used for education, but the new law recognizes that some disabled individuals may not be able to attend college or want to go. Another change is that 529 plan funds can be used to pay for private K through 12 education up to $10,000. Prior to the new legislation, plan funds could be used only for higher level continuing education.
Next, a disabled person can contribute employment earnings to their Able account up to $12,140 in the U.S. and $13,960 in Hawaii, in addition to up to $15,000 contributed from other sources (including your family, friends, and benefits), if the disabled employee is not covered by a retirement plan funded in whole or in part by employer contributions.
Lastly, you may be able to contribute up to $2,000 of contributions to an ABLE account and qualify for the Saver’s Credit up to $1,000 if your single, which can offset federal income taxes you could possibly owe overall.
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