The ABLE Act provides individuals with disabilities a host of benefits to start saving for the future. For starters, you get to keep your public benefits! And earnings on the money in your account are free from federal and state tax.
Keep public benefits
Contributions are not used to determine eligibility1 for resource-based benefits. What does that mean? You and others can save money for your financial future without impacting your benefits. An ABLE account will supplement but not supplant public provided benefits. There is a limit before Supplemental Security Income (SSI) benefits may be suspended.2
Income tax benefits
Earnings in an ABLE account are not taxed by the federal or state government. Money withdrawn from the account to pay for Qualified Disability Expenses3 is also not taxed.4
Estate tax benefits
Contributors other than the account owner can lessen the value of their taxable estate by making gift contributions into the account owner's ABLE account, up to the contributor's gift tax exclusion limit (currently $15,000) per calendar year per account owner. All gift contributions in aggregate made to the account owner's ABLE account and any other monetary gift made by that contributor to the account owner in a year cannot exceed the gift tax exclusion limit.
1There is an annual contribution limit of $15,000 from all contributors to the account. Contributions by an employed Account Owner who has earned income during the current calendar year, and has not contributed to an employer-sponsored retirement plan, including a 401 (k), 403(b), 457(b) plan, during the current calendar year may exceed the Annual Contribution Limit by the lesser of (a) the compensation included in the Account Owner’s gross income for the taxable year, or (b) the federal poverty line for a one-person household as determined for the calendar year preceding the calendar year in which the taxable year begins.
2Account balances up to and including $100,000 will be disregarded for purposes of determining eligibility to receive resource-based benefits. When the total account balance exceeds $100,000, the amount over $100,000 will be used to determine if the account owner has exceeded the SSI resource limit of $2,000, whether alone or in combination with other resources. If the resource limit is exceeded, SSI benefits will be suspended until the account balance falls below $100,000. This suspension does not impact the account owner's ability to receive Medicaid.
3The earnings portion of a withdrawal not used for Qualified Disability Expenses is subject to federal and state income tax and may be subject to an additional 10% federal tax.
4Withdrawals from the account for a Qualified Disability Expense (other than housing) will be excluded from the account owner's resources if it is retained beyond the month received as long as the account is still open, the withdrawal is unspent, and the use of the withdrawal can be identified. Withdrawals from the account to pay for housing-related expenses must be spent within the month of the withdrawal. If the housing expense is paid after the month of withdrawal, it will be included as the account owner's income.