Increase in ABLE Account Contributions
You are probably asking what are “ABLE” accounts? These are little-known benefits that were put into the Internal Revenue Code in 2015. It allows parents or other relatives to provide tax-free savings account for very handicapped individuals that are unable to work and who have an early onset disability. It must be a permanent disability has been diagnosed before the individual becomes age 26 but the handicapped individual will remain eligible for the rest of their life.
These accounts allow for the accumulation of capital that can be used for the health, maintenance, support or education for the handicapped individual. If used for these purposes, the earnings in these accounts are tax-free
Prior to the Tax Cuts law, the annual contribution limitation was the amount of the annual gift tax exemption, which in 2018 was to be $15,000.
Effective for tax years beginning after 2017 and before January 1, 2026, the limit on the annual contribution has been increased. Once the annual exclusion has been reached, an ABLE account designated beneficiary can contribute an additional amount, up to the lesser of (a) the Federal Poverty line for a one-person household, or (b) the individual’s compensation for the tax year.
If you know anyone who has severely handicapped kids or grand kids, please share this post with them. It isn’t well known and utilizing these accounts can really help both the family supporting the handicapped relative as well as the disabled individual for the rest of their life.
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