Author: Deborah Goodkin, Managing Director, Savings Plans, First National Bank of Omaha
Tax season is officially upon us. As each of us takes a close look at our earnings, benefits and deductions over the past year, now is the perfect time to explore one of the best features of the Enable Savings Plan Alabama – its many tax advantages.
Unlike a standard savings account, an Enable Alabama account offers a number of benefits tailored to the unique financial needs of individuals with disabilities. Most importantly, Enable Alabama funds are not counted when calculating eligibility for resource-based benefits such as Supplemental Security Income (SSI). However, that’s far from the only benefit of saving with Enable Alabama.
Read on for a breakdown of the numerous tax advantages available to Account Owners.
Enable Alabama Account Owners benefit from compounded, income tax-deferred growth, also known as “growth on growth.” Because Enable Alabama account earnings are state and federal income tax-deferred, the full earnings amount remains in your account and grows with no money being subtracted to pay current tax obligations. That means earnings happen more tax efficiently, helping to increase the account value even faster and maximize earnings potential associated with market growth.
Withdrawals from your Enable Alabama account are tax-free when used for qualified disability expenses, meaning your savings go where you need them most. What’s considered a qualified disability expense? Under the Able Act, it’s defined as an expense related to the disability of the Eligible Individual. This covers a wide range of categories that extend beyond medical expenses, including education, service animals, housing, transportation, financial management and administrative services and basic living expenses. Click here to explore the full list of qualifying expenses.
Estate Tax Benefits
Enable Alabama contributions also offer tax benefits for the friends and family of Account Owners. Through gift contributions, loved ones can lessen the value of their taxable estate. This benefit applies up to $15,000 per calendar year per Account Owner – if no other monetary gifts have been made – which is the gift tax exclusion threshold for 2020.
529 Plan Rollovers
A 529 College Savings Plan is a tax-advantaged plan that allows families to save for higher education expenses. Like Enable Alabama, contributions to a 529 plan grow tax deferred and withdrawals are tax-free when used for qualified educational expenses.
Many families save for their children’s higher education in a 529 account – but what happens if their child decides not to attend college, or is unable to because of his or her disability? A great benefit of the Enable Savings Plan Alabama is that families can roll over funds from a 529 account into an Enable Alabama account without incurring any tax consequences. This can be done both for a 529 account with the same beneficiary as the Enable Alabama account, or for a 529 account with a beneficiary in the same family.
These many tax benefits, as well as the ability to save with Enable Alabama without impacting your eligibility for resource-based benefits such as SSI, are why individuals with disabilities and their families nationwide love the Enable Savings Plan Alabama.
If you have any additional questions regarding your account or the tax benefits of the Enable Savings Plan Alabama, please reach out to our team via email at email@example.com or at 1-866-833-7949.