The U.S. Congress passed a bill in December called the Achieving a Better Life Experience Act (ABLE Act). The ABLE Act allows people with disabilities to establish tax-free savings trusts where money can be deposited to pay for future disability-related expenses that help them maintain their health, independence and quality of life.
The trust can be used for such expenses as modifications to a home to enhance independent living, specialized health and dental care, education and transportation. These trusts are even more attractive because people with disabilities can save up to $100,000 in their account without losing eligibility for other services, including Social Security benefits. To be eligible, the disabling condition must have occurred prior to age 26.
Under current federal gift tax limitations, as much as $14,000 can be deposited annually. Donors will be able to deduct deposits from income tax calculations, and any gains are protected from income taxes. Each state must create its own program before its residents can establish ABLE savings accounts.
The state Senate is working to be sure that Iowa is ready to implement the program as soon as federal rules are finalized. Iowa’s program will be modeled after the College Savings Iowa 529 program and administered by the State Treasurer. You can track progress of the bill, SSB 1210, which was approved by the Senate Human Resources Committee this week, as it moves through the Legislative process at www.legis.iowa.gov.
Learn more about the ABLE Act and the benefits of an ABLE account from the National Disabilities Institute at www.realeconomicimpact.org/News.aspx?id=460.