For 2015 there is a new type of tax-deferred savings account, called the ABLE account. The acronym ABLE comes from the name of the act: Achieving a Better Life Experience Act of 2014. As such, these accounts are dedicated to provide for tax-deferred savings (non-deductible contributions) of up to $14,000 per year for folks who became blind or disabled before age 26.
Tax-free distributions from the ABLE account can be used to pay for housing, transportation, education, job training, and the like. The assets in an ABLE account are not counted toward an individual’s eligibility to qualify for Medicaid, Supplemental Security Income and other federal mean-tested benefits (up to a $100,000 balance in the ABLE account).
This is the great benefit of the ABLE account, because the means-testing applied to so many benefits for folks with disabilities actually discourages savings of this nature. With the ABLE account, people with disabilities will be able to save in a tax-efficient manner for future needs.
There will be much more information about the ABLE accounts as the regulations from the IRS are finalized. Stay tuned.