ABLE accounts offer a tax-advantaged way to fund disability expenses

25 Apr ABLE accounts offer a tax-advantaged way to fund disability expenses

What’s New

Who’s affected: People with disabilities and their families.

Key changes: The Achieving a Better Life Experience (ABLD Act of 2014 offers a new type of tax-advantaged savings program for people who are disabled or blind. The act allows states to establish tax-exempt ABLE programs to help people with disabilities build accounts that can pay qualified disability expenses.

For federal purposes, tax treatment of these accounts will be similar to that of Section 529 college savings plans:

• Anyone can make contributions to ABLE accounts, but the contributions won’t be deductible.

• income earned by the accounts generally won’t be taxed.

• Distributions, including portions attributable to investment earnings generated by the account, to an eligible individual for qualified expenses won’t be taxable.

Qualified expenses are those related to the individual’s disability, such as health, education, housing, transportation, employment training, assistive technology, personal support, and related services and expenses.

Planning tip: Contact your tax advisor for the latest information on the availability of ABLE accounts in your state.