Saving for Disability Related Expenses – Iowa Able Accounts

Posted on: January 29th, 2016

In 2015, Iowa enacted the ABLE (Achieving a Better Life Experience) Act, which allows tax-free savings accounts for individuals with disabilities to pay for certain qualified expenses related to their disability. The ABLE accounts are expected to be available for Iowa residents beginning July 1, 2016.  ABLE accounts are modeled after 529 college tuition savings accounts and are designed to ease some of the financial burdens facing Iowans with disabilities.

Up to $14,000.00 can be contributed to an ABLE account each year for a beneficiary and, as with a 529 account, the donor is entitled to an Iowa income tax deduction for contributions equal to the maximum deduction for 529 contributions. All growth on the account is tax-free.

The funds in an ABLE account can be used for supplemental disability-related expenses (such as education, job training, or transportation) that are not covered for by other benefits received by the beneficiary, like private insurance or Medicaid.

Generally, disabled individuals are subject to a $2,000.00 personal resource limit in order to be eligible for Medicaid benefits.  Under the ABLE Act, the first $100,000.00 of assets in a qualified ABLE account are exempt from this limit.  This allow a disabled individual to continue to receive Medicaid benefits while providing funds to pay for additional expenses not covered by Medicaid.

The funds in an ABLE account are available to be used throughout the beneficiary’s lifetime, but upon the death of the beneficiary any remaining funds revert to the state to repay any Medicaid benefits received.

ABLE Accounts are a great vehicle for parents, family members or loved ones of a disabled individual to provide for qualified disability-related expenses without jeopardizing other benefits.

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