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The Achieving a Better Life Experience (ABLE) Act was signed into law in 2014 by President Obama to provide better financial footing for certain people with special needs. It allows qualified disabled people and/or their families to create a special, tax-advantaged ABLE savings account without impacting their eligibility for needs-based government benefits like Supplemental Security Income and Medicaid.

Contribution cannot exceed $15,000 per year, a rule that remains the same in 2019. However, the IRS has made a few updates to its rules regarding how people may contribute to ABLE accounts. Below is a breakdown of what’s new.

Changes to ABLE Accounts in 2019

  • Contributions may now include any contributions from a section 529 program and count toward the $15,000 limit. This new rule is beneficial to families who have a 529 savings plan but would like to use those funds for other expenses.
  • Employed disabled individuals can contribute their income and wages into their ABLE account up to $12,140 each year, as long as they do not have a retirement plan available to which their employer would contribute.
  • Contributions to an ABLE account are included in the IRS’s Saver Credit. For low-income to moderate-income earners, contributions to an ABLE account may qualify individuals for a tax credit of up to $2,000.

By law, all distributions from an ABLE account must be used exclusively for qualified expenses like higher education, a primary residence, transportation, employment costs, and other appropriate health and wellness expenditures. Each state has its own rules regarding ABLE accounts, such as:

  • Whether it offers enrollment to out of state residents,
  • The initial minimum contribution requirement to open an ABLE account,
  • Fees or restrictions to the number of disbursement you are allowed, and much more.

Click here to learn more about ABLE accounts in your state, and feel free to comment below with any questions.

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