The 529 ABLE accounts are a new way for taxpayers caring for disabled children to achieve tax savings. Jason Borkes, in an article published in the Journal of Accountancy, discusses the programs.
ABLE (Achieving a Better Life Experience) programs were created as part of the Tax Increase Prevention Act of 2014 and became effective under Michigan law on January 26, 2016.
Eligibility
To be eligible for an account, an individual must be deemed disabled before the age of 26 in either of two ways:
- The individual is entitled to benefits based on blindness or disability under Title II of XVI of the Social Security Act.
- The individual files a disability certification with the IRS for the tax year.
An individual may only have one ABLE account at a time with a maximum balance of $500,000.
Contribution amount and distributions
The contribution limit for an ABLE account is currently at $14,000, which is the annual gift tax exclusion for the tax year 2015. Distributions from the account are tax-free as long as the money is used for qualified disability expenses.
What are qualified expenses?
These are expenses that benefit the disabled individual. Some examples given are: expenses for education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administration services, legal fees, expenses for oversight and monitoring, funeral and burial costs, and others.
For more information on ABLE accounts, please read the full referenced article. If you need assistance in tax planning with ABLE programs, or have additional questions about eligibility, please contact Brenda Jacobs at (616) 608-8530 or bjacobs@brickleydelong.com.