There are some very positive enhancements for taxpayers with disabilities among the many changes brought about by the 2017 Tax Cuts and Jobs Act (TCJA) .
Achieving a Better Life Experience (ABLE) accounts were originally designed to help those with disabilities. The savings are intended for expenses incurred as a result of the disability. Some typical examples of these types of expenses include housing, education, transportation, health and wellness along with assistive technology costs. Contributions to these accounts are not tax deductible. However, distributions and earnings are tax-free when used to pay for these types of qualified expenses.
With the TCJA, eligible individuals can put more money into their ABLE account. Traditionally, the annual contribution total equalled the annual gift-tax exclusion amount. At present time, this amount is $15,000. Beginning in 2018, if the ABLE account beneficiary is employed, they may contribute an additional $12,140. The one exception to this new ruling occurs if the beneficiary’s employer already contributes to a workplace retirement plan on their behalf. In that case, the additional contribution is not allowed.
Going forward, ABLE account holders may roll money from qualified tuition programs, such as 529 plans, into their ABLE accounts as well. A final enhancement brought about by the TCJA means that moderate to low income ABLE account employees may qualify for the Saver’s Credit. The IRS link provides information on this credit, what it does, and who is eligible. The impact to ABLE account holders is contributions up to $2,000 may qualify for this credit. The Saver’s Credit is claimed on Form 8880 at tax time.