Congress Passes ABLE Act
Congress passed the ABLE Act today, which creates tax-favored accounts for children and adults whose disability occurred before age 26.
The ABLE Act allows these tax-favored accounts to receive up to the annual gift tax exemption (currently $14,000 per year). Beneficiaries are restricted to one account, but anyone could contribute to their account. Modeled after 529 college savings accounts, ABLE account programs will need to be implemented by the states.
According to the Congressional Budget Office, “assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits. For SSI [Supplemental Security Income], only the first $100,000 in each ABLE account would be disregarded.”
The Senate passed the ABLE Act as part of the Tax Increase Prevention Act of 2014, also known as “tax-extenders,” a bill that includes a variety of extensions for temporary tax provisions. The House passed the ABLE Act overwhelmingly 404-17 on December 3, 2014, and engrossed it into the “tax-extender” bill before sending it to the Senate last week.