ABLE Act

The ABLE Act (Achieving a Better Life Experience) was passed in 2014.  It allows for special tax-favored savings accounts for eligible individuals with a disability. An eligible individual is a person who became disabled prior to the age of 26 and either has been determined disabled for purposes of SSI or Social Security disability or has filed a qualifying disability certification with the Secretary for the taxable year. The account can be established by the beneficiary, a family member or friend. However, the beneficiary can have only one such account. The account cannot accept more than the annual gift-tax exemption per year ($14,000 for the year 2015). In California, the maximum balance cannot exceed $350,000.

Post-tax dollars are deposited into the account. There is no tax on account income if the distribution pays for qualified expenses. Examples of qualified expenses are: education, transportation, employment training and support, assistive technologies and personal support services. This list is not exclusive. There are many regulations surround ABLE Act accounts. Be familiar with them, so you don’t incur any tax penalties for running afoul of the rules.