An ABLE account allows an eligible person with a disability and his or her family to get tax advantages on savings for certain disability-related expenses, including qualified education costs. ABLE accounts were created by the federal Achieving a Better Life Experience Act of 2014.
Here are Five Things to Know About an ABLE Account:
- Contributions to the account come from after-tax dollars and are not deductible on a federal income tax return. Some states, however, allow state income tax deductions for contributions.
- All investment earnings on the account grow tax-free. They stay tax-free even when withdrawn, provided the money is taken out to pay qualified disability expenses.
- Qualified expenses include, among other things, medical treatment, education, job training, special-needs transportation and housing.
- Annual contributions to the account are generally limited to the federal gift tax annual exemption, currently $15,000. The account beneficiary may be allowed to contribute an additional amount tied to the federal poverty level.
- Within guidelines, you can roll over assets from a 529 college savings plan to an ABLE account.
To learn more about this topic, actively-contributing members of the Annuity Plan can log in to the EY Financial Planning Center® website at https://pbucc.eyfpc.com, or may contact an EY financial planner at 1.877.924.1047.
This article is used with permission by Ernst & Young LLP.