House Passes Bill for Tax-Favored Accounts for Persons with Disabilities

 In Dallas Morning News Blog, Special Needs Planning

Individuals with disabilities and their families are one step closer to being able to open tax-exempt savings accounts without affecting their public benefits.  People with disabilities would be able to work and save their money and become more independent.

U.S. HouseOn December 3, 2014, the U.S. House overwhelmingly approved the Achieving a Better Life Experience Act of 2013 (ABLE Act), which allows certain individuals with disabilities to create tax-exempt savings accounts up to $100,000 and retain their government benefits.  Family members are allowed to contribute up to $14,000 each per year to the ABLE account.  Like 529 qualified education accounts, interest earned is not subject to income tax.  Distributions from the account are not subject to income tax if they are used for qualified disability expenses, including education, housing, transportation, employment training, assistive technology and legal fees.

To be eligible, the individual must have been determined by the social security administration to be disabled, or file a “disability certification.”  Each individual may only have one ABLE account.

Accounts (up to $100,000) and most distributions for qualified disability expenses are not considered resources or income for determining eligibility for government benefits based on financial need, such as SSI and Medicaid.  Distributions for housing are not disregarded for SSI purposes, but are disregarded for Medicaid eligibility.

The Senate may vote on the ABLE Act next week, and with its bipartisan support there’s a good chance it will pass during the lame-duck session.  I am proud to be a member of the National Academy of Elder Law Attorneys (“NAELA”), an organization of lawyers who are experienced and trained in working with the legal problems of aging Americans, individuals of all ages with disabilities, and their families.  NAELA has advocated for the Able Act and for other laws on behalf of individuals with disabilities.

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