IRS Issues Notice on ABLE Accounts

The Internal Revenue Service recently issued a notice to people with disabilities who are employed that for the first time they can now deposit extra money into their ABLE accounts without losing Social Security, Medicaid, or other government benefits. Annual contributions to ABLE accounts are currently capped at $15,000 but under new legislation passed in late 2017 individuals with disabilities who are employed may now accrue at least some of their wages as well.


This year, Americans living in the lower 48 states may now deposit an additional $12,140 from their income which means workers with disabilities are allowed to save up to $27,140 in their ABLE account in 2018. Hawaii residents can save an additional $13,390 and Alaska residents can save an additional $15,180, according to the release put out by the IRS this month.


Additionally, the IRS has announced that workers with disabilities and an ABLE account may now qualify for a Saver’s Credit to help reduce their federal tax bill. Formerly known as the Retirement Savings Contributions Credit, the Saver’s Credit gives special tax breaks to low and moderate income taxpayers saving for retirement. The Saver’s Credit can be taken for contributions to a traditional or Roth IRA, a 401(k), SIMPLE IRA, SARSEP, 403(b), 501(c)(18) or governmental 457(b) plan.


ABLE accounts, established under the Achieving a Better Life Experience Act of 2014, are designed to help people with disabilities and their families save and pay for disability-related expenses. Distributions are tax-free to the designated beneficiary if used to pay qualified disability expenses such as housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services and other disability-related expenses.


To qualify for an ABLE account, the individual with disabilities must have suffered his or her onset prior to the age of 26-years old. Currently, 39-states offer ABLE programs and many are open to people with disabilities nationwide. Because eligibility for many government benefits essentially require people to remain poor, ABLE accounts are vital to help pay for the extra costs of living a dignified life and save for retirement.


Like state 529 college savings plans, states do offer qualified individuals and families multiple options to establish ABLE accounts with different investment strategies so each individual and his or her family will need to project possible future needs and costs over time. With proper planning and attention to detail, along with taking advantage of changes to ABLE rules, families of children with disabilities can help their loved ones live dignified and comfortable lives.

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