July 8, 2015
The Achieving a Better Lifer Experience (ABLE) Act of 2014 was signed into law in December 2014. This new provision authorizes any state to offer its residents the option of setting up an ABLE account. The ABLE account allows people with disabilities, and their families, the ability to save and pay for disability related expenses.
These accounts are modelled after Section 529 college savings plans. Once a state enacts legislation, a qualified ABLE account may be set up by a taxpayer. The account will then be maintained by the state and managed by a financial institution. Contributions to an ABLE account are not tax deductible for federal income tax purposes. However, the earnings on the account are not taxable either. An eligible individual is limited to one ABLE account.
Key points for ABLE accounts are:
At the present time, each state’s legislature is considering legislation to allow the setup of ABLE accounts. As of the end of June, here is the status of ABLE legislation in each state:
Later in the year, we will be giving additional updates on the status of the legislation in each state and additional details on ABLE accounts once the regulations are finalized. The IRS has just recently released proposed regulations that will govern ABLE accounts. We will update you when these become final later this year.
For more details on ABLE accounts see the following on the IRS website: