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529 ABLE Accounts

The Achieving a Better Life Experience (ABLE) Act

529 ABLE Accounts

The ABLE Act, which was signed into law in December 2014, allows Americans who are living with disabilities to save money for college and other expenses in a tax-deferred account as a supplement to private insurance and public benefits.

529 ABLE (529A) accounts

Similar to a 529 college savings plan, 529 ABLE accounts are savings accounts administered by the states. Money can be withdrawn tax-free when the funds are used to pay for qualified disability expenses. The contribution for 2016 is $14,000 (the amount of the annual gift tax exclusion) and many states have total contribution limits that exceed $300,000.

However, if a person's 529 ABLE account balance exceeds $100,000 they will no longer be eligible for SSI benefits. Also, if the beneficiary dies, states will be able to recoup some of expenses through Medicaid.

The signing of the PATH Act in 2015 removed residency requirements from 529 ABLE accounts, giving individuals the option of using any state's plan. Yet some states may offer tax benefits for those who use their home state's plan.

Why 529 ABLE accounts are so important

Prior to the ABLE Act, if a person with a disability earned more than $700 per month or had savings or other assets in excess of $2,000 they risked having to forfeit eligibility for government programs like Medicaid. The only way families could get around this was to set up a special needs trust, which is often very costly to do. As a result, there has been little incentive to save, and many people with disabilities end up living below the poverty level.

Qualified disability expenses

Qualified disability expenses include education, job training and support, healthcare and financial management.

Eligibility

To qualify for a 529 ABLE account, individuals must have been diagnosed with a significant disability before they turned 26 years old, with a condition expected to last at least 12 consecutive months. The individual must also be receiving benefits under SSI and/or SSDI, or be able to obtain a disability certification from a doctor.

Parents who have saved money in a 529 college savings account may be able to roll the funds into a 529 ABLE account in the event the beneficiary is later diagnosed with a disability such as autism.

Investment options

States will provide families with multiple investment options to suit various savings goals and risk tolerance levels. Account owners will be able to make changes to their investments two times per year.

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States with active 529 ABLE accounts

Each state will establish their own regulations to make 529 ABLE accounts available. Here are states that currently or will soon offer ABLE programs:

State Plan Name Residency Requirement State Tax Deduction Total Asset-Based Expense Ratio Debit or Purchasing Card?
Alabama Enable Savings Plan Alabama NO NO 0.50% - 0.56% YES
Alaska Alaska ABLE Plan NO NO 0.34% - 0.38% NO
Colorado Colorado ABLE NO NO 0.34% - 0.37% YES
District of Columbia DC ABLE NO NO 0.34% - 0.37% YES
Florida ABLE United YES NO 0.035% - 0.290% NO
Georgia Georgia STABLE YES Contributions to the STABLE Account Plan are not deductible for Georgia state income tax purposes. Earnings from the investment of contributions to a STABLE Account Plan will not be subject to Georgia state income tax, to the extent such earnings are exempt from U.S. federal income taxation under Section 529A. 0.19% - 0.34% YES
Illinois Illinois ABLE NO NO 0.34% - 0.38% NO
Indiana INvestABLE Indiana NO NO 0.34% - 0.37% YES
Iowa IAble Plan NO Iowa individual taxpayers who make a contribution can deduct up to $3,239 for 2017 (adjusted annually for inflation) of their contributions including rollovers from a Non-Iowa 529A plan, in determining their adjusted gross income for Iowa income tax purposes. 0.34% - 0.38% YES
Kansas Kansas ABLE Savings Plan NO NO 0.34% - 0.38% NO
Kentucky STABLE Kentucky YES NO 0.19% - 0.34% YES
Louisiana LA ABLE YES NO NO
Massachusetts Attainable Savings Plan YES NO 0.57% - 0.94% YES
Michigan MiABLE NO Contributions to a plan account are deductible, in an amount not to exceed $10,000 for married taxpayers filing jointly ($5,000 for single taxpayers and for married taxpayers filing separate returns), in computing the contributor's taxable income under Michigan law. 0.50% - 0.78% YES
Minnesota Minnesota ABLE Plan NO NO 0.34% - 0.38% NO
Missouri MO ABLE YES Missouri residents and taxpayers may deduct the amount of their contributions to a MO ABLE Account from their Missouri adjusted gross income. Annual contributions made to the MO ABLE program up to and including eight thousand dollars ($8,000) per participating taxpayer, and up to sixteen thousand dollars ($16,000) for married individuals filing a joint tax return, shall be subtracted in determining Missouri adjusted gross income. 0.19% - 0.34% YES
Montana Montana ABLE NO Any earnings on contributions are not subject to Montana state income tax. Account assets grow free of current Montana income tax and are tax-free if withdrawn for qualified disability expenses. 0.34% - 0.37% YES
Nebraska Enable Savings Plan NO Contributions by anyone who files a Nebraska state income tax return are eligible to receive a Nebraska state income tax deduction for their own contributions of up to $10,000 ($5,000 if married, filing separately). 0.50% - 0.56% YES
Nevada ABLE Nevada NO NO 0.34% - 0.38% YES
New York NY ABLE YES NO YES
North Carolina The NC ABLE Program NO NO 0.34% - 0.38% YES
Ohio STABLE Account NO Contributions are deductible for Ohio state income tax purposes, up to $2,000 per year, per STABLE Account contributed to, with unlimited carry forward. 0.19% - 0.34% for Ohio residents YES
Oregon Oregon ABLE Savings Plan YES Contributions to an ABLE account with a beneficiary under the age of 21 are deductible for Oregon income tax purposes up to annual limits. For 2016, the deduction is $4,660 for taxpayers filing jointly and $2,330 for single filers. 0.30% - 0.381% YES
Oregon ABLEforAll NO Contributions to an ABLE account with a beneficiary under the age of 21 are deductible for Oregon income tax purposes up to annual limits. For 2016, the deduction is $4,660 for taxpayers filing jointly and $2,330 for single filers. 0.30% - 0.3810% YES
Pennsylvania PA ABLE NO NO 0.34% - 0.38% YES
Rhode Island RI's ABLE NO NO 0.34% - 0.38% NO
Tennessee ABLE TN NO NO 0.00% - 0.62%. NO
Vermont Vermont ABLE YES NO 0.19% - 0.34% YES
Virginia ABLEnow NO A Virginia individual income tax deduction of up to $2,000 per account on contributions, with unlimited carryovers to the extent of the contributions. 0.37% - 0.40% YES

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