Author: Diane Stewart, Enable Outreach Specialist
The Tax Cuts and Jobs Act, which was signed by U.S. Congress December 22nd 2017, included a few key updates to ABLE account rules. These changes help to enhance and streamline savings benefits for individuals with disabilities, and have already had a positive impact on many Enable Alabama account owners.
Interested in learning more? We’ve compiled answers to some common questions:
What are the major changes?
The new tax bill included three main changes to ABLE accounts:
First, this update allows families who have money saved in a 529 College Savings Plan to roll over up to $15,000 per year into an ABLE account for the same qualified beneficiary or for a qualified beneficiary in the same family. This transfer is no longer subject to federal tax, a change that gives families the freedom to use their savings where they are most needed without facing penalties.
Second, this update makes many ABLE account beneficiaries who contribute their earnings to the account eligible for the Saver’s Credit on their taxes. The Credit, originally designed to help low- and moderate- income workers who make contributions to savings plans, will depend on the specifics of each account, and does not apply to rollover funds. Account owners are encouraged to consult with an accountant or tax professional.
Third, a new provision permits individuals with disabilities who are employed to contribute earnings to their own ABLE accounts, surpassing the $15,000 maximum per year. Beneficiaries can contribute up to $12,140 per year – the federal poverty line for a single-income household – if they are not already part of their employer’s retirement plan. For more information, and to learn more about how to deposit ABLE to Work contributions call the Plan at 1-866-833-1949.
What are next steps?
Enable Alabama account owners should check with an accountant or tax professional to see whether they might qualify for the Saver’s Credit this tax season, especially if you are a beneficiary who contributes earnings to your ABLE account.
If you have a 529 Savings Plan and would like to roll over the funds into an ABLE account for a qualified individual, or if you are an individual with disabilities who would like to contribute earnings to your Enable Alabama account, you are encouraged to learn more about your options by contacting the Plan.
In either case, the changes are designed to help individuals and their families get the most out of their Enable Alabama accounts.
Full text of the bill is available here: https://www.congress.gov/bill/115th-congress/house-bill/1/text