Thanks to a change in tax laws for the new year, disabled people can save more money without losing their eligibility for government benefits.
According to the Internal Revenue Service, the federal gift tax exclusion will increase from $16,000 to $17,000 annually beginning this month. The deposit limit for ABLE accounts is linked to that metric, so that will rise as well.
Annual ABLE account deposits are typically limited to the amount of the IRS’ gift tax exclusion. However, in addition to the $17,000 gift tax exemption, individuals with disabilities who are employed may be able to save a portion of their wages.
Disabled people who are employed will be able to save $13,590 more this year in the 48 contiguous states. According to the Autism Society, Alaska residents can save an additional $16,990 in wages. Hawaii residents can save $15,630.
The Achieving a Better Life Experience Act of 2014 established ABLE accounts. These tax-advantaged accounts, more widely available in recent years, are an essential tool allowing disabled people to save money without jeopardizing their eligibility for government benefits.
ABLE accounts are available through programs in 47 states. If an individual is disabled before the age of 26, many are available to them nationwide. A recently passed law will raise the age limit to 46 in three years.
According to ISS Market Intelligence, there were more than 131,000 ABLE accounts open in September, totaling $1.133 billion in assets.
Money in an ABLE account can be spent on any qualified disability expense, such as housing, healthcare, food, and education, among other things. For example, I’ve used the funds to pay a dental bill. I have also used my ABLE account funds to purchase clothes and adaptive equipment.
However, there are tax penalties if you use the funds for a nonqualified activity, such as buying gifts for someone else or going on vacation. Disabled people should be allowed to pay for vacations and other expenses in the same way that their non-disabled peers do. The government does not meticulously monitor how much money non-disabled people spend.
Senators Sherrod Brown and Rob Portman of Ohio introduced the SSI Savings Penalty Elimination Act last May. The initiative aimed to modernize asset limits, allowing beneficiaries to save more money in an emergency without losing their benefits. These limits have not been updated since 1989. Unfortunately, it did not pass.
Disabled people, like everyone else, should be able to save money. One approach to accomplish this is to eliminate the asset limits associated with programs such as Medicaid and SSI. The government should not make it so difficult for disabled people to achieve financial independence.
Diament, Michelle. “IRS Increases Limit for Able Accounts.” Disability Scoop, Disability Scoop, 9 Jan. 2023, https://www.disabilityscoop.com/2023/01/09/irs-increases-limit-for-able-accounts/30188/.
“How Can Funds Be Used?” ABLE National Resource Center, ABLE National Resource Center, 10 Feb. 2021, https://www.ablenrc.org/get-started/what-can-funds-be-used-for/.
Konish, Lorie. “Bipartisan Bill Aims to Update Rules for Federal Benefits for Elderly, Disabled.” CNBC, CNBC, 2 May 2022, https://www.cnbc.com/2022/05/02/senate-bill-seeks-to-update-supplemental-security-income-asset-rules.html.
Parrott, Sharon. “Important Investments, Significant Disappointments in Year-End Legislation.” Center on Budget and Policy Priorities, Center on Budget and Policy Priorities, 20 Dec. 2022, https://www.cbpp.org/press/statements/important-investments-significant-disappointments-in-year-end-legislation.
Waggoner, John. “Able Accounts Give Help for People with Disabilities.” AARP, AARP, 4 Jan. 2023, https://www.aarp.org/money/investing/info-2023/how-able-accounts-help-people-with-disabilities.html.