Here we are again. It’s December 8, 2014 and many 2014 U.S.
Tuesday night the US Senate finally got around to extending dozens of “temporary” tax breaks for 2014 – a bill which is expected to be signed by the President shortly. We discussed the tax breaks that were on the verge of extinction last week. A full list including individual and business extenders can be found here .
If you are a dedicated reader of our blog, you might remember an article we wrote in September addressing rumors that 529 plans could possibly be amended to include more benefits for disabled persons. Instead of amending 529 plans, a new account will be created and known as the ABLE account (Achieving a Better Life Experience).
The accounts will look very similar to the tax-free 529 plan and will be run by the states. Relatives and friends will be able to contribute up to $14,000 a year for a disabled beneficiary. Like a 529 plan, contributions are not deductible, but account earnings and distributions are tax-free as long as they are used to pay for housing, education, transportation and wellness. Furthermore, contributions will be exempt from gift tax and each state will decide whether contributions are exempt from their own income tax.
The accounts are restricted to those who have become disabled before reaching the age of 26 and may be limited to those with developmental disabilities, mental illness, and severe childhood conditions such as cerebral palsy. Earnings within the account will not disqualify a person from receiving federal assistance benefits from Medicare and Supplemental Security Income.
While ABLE accounts certainly won’t solve all financial challenges faced by so many with disabled loved ones, it is most definitely a step in the right direction.
Stephen Osborne, CPA
Certified Public Accountant