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New Tax Advantage Plan for People with Disability

  • Date: 2015/01/06 (Rev: 2016/03/24) UHY LLP - +1 (586) 843-2637
  • Synopsis : New Tax Increase Prevention Act of 2014 includes a tax advantage plan for people with disabilities.

Main Document

On December 19, 2014 President Obama signed the Tax Increase Prevention Act of 2014 ("TIPA" or "the Act") into law, which included a tax-advantaged savings program for persons with disabilities. The program, known as the Achieving a Better Life Experience Act of 2014, provides for the following:

Achieving a Better Life Experience (ABLE) account for disabled:

A new tax savings program is available for disabled individuals and families raising children with disabilities.

A "qualified disability trust" may be established and used to provide financial assistance to a disabled person without disqualifying the individual for other certain government benefits.

With treatment similar to that of a qualified tuition plan, a tax exemption will be allowed on distributions and amounts in the ABLE account would accumulate tax free.

A designated beneficiary of an ABLE account is an eligible individual if:

  • The individual is entitled to benefits based on blindness or disability under the Social Security disability insurance program and the blindness or disability occurred before the date the individual reaches age 26, or
  • A disability certification for the individual has been filed with the IRS that the individual has incurred prior to reaching age 26, certain medically determined physical or mental impairments or is blind.

Distributions from the ABLE account would be tax free to the extent the distribution is used for qualified disability expenses.

Qualified disability expenses are any expenses related to the eligible individual's blindness or disability and include expenses such as

  • education;
  • housing;
  • transportation;
  • employment training and support;
  • assistive technology and personal support services;
  • health, prevention and wellness;
  • financial management and administrative fees;
  • legal fees;
  • expenses for oversight and monitoring;
  • funeral and burial expenses;
  • and other expenses that are approved by the IRS.

The maximum amount of funding into an ABLE account per year from all contributors is limited to the annual gift tax exclusion which will be $14,000 for 2015.

Bankruptcy exemptions for ABLE accounts:

Funds placed in an ABLE account no later than 365 days before the filing date of the bankruptcy are not included in the bankruptcy estate if the designated beneficiary is the debtor's child, stepchild, grandchild or step-grandchild. The exclusion is limited to $6,255 for funds placed in an ABLE account having the same beneficiary between 365 and 720 days before the filing date.

ABLE accounts go into effect for tax years beginning after December 31, 2014.

For more information or questions on this topic, please contact your professional at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040, or visit www.uhy-us.com

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