Father drawing with young daughterIn May 2017, MEFA enthusiastically expanded its mission when we officially announced our new role as state sponsor of the Attainable Savings PlanSM. Attainable allows individuals with disabilities and their families to save for disability-related expenses in a tax-advantaged savings account. The program represents Massachusetts’ response to the Achieving a Better Life Experience (ABLE) Act, which allows for the creation of these important plans.

Recent new legislation brought revision to ABLE regulations, which affect all Attainable accounts. It’s important for Attainable account owners and their families to understand what’s been updated. Below, I’ve outlined the details of each change.

Annual Contribution Limit

Contributions into a single Attainable account are now limited to $15,000, up from $14,000 in 2017. This dollar limit applies to the sum of contributions from all sources into each Attainable account. The contribution limit does not reset or increase if the beneficiary spends down the contribution in the same year.

ABLE Financial Planning Act

Provided that the beneficiary is the same individual on both accounts (or one beneficiary is a family member of the other), it is now allowable to transfer funds from a 529 college savings plan into an ABLE account without incurring any tax or penalty. The funds rolled over from the 529 plan are subject to the annual contribution limit of $15,000 into an ABLE account. The rollover may originate from any state’s 529 plan.

Retirement Savings Contributions Tax Credit (Saver’s Credit)

ABLE account owners who meet certain criteria can receive a non-refundable Saver’s Credit on their 2018 federal taxes for contributions into an ABLE account. Eligible individuals must meet the following criteria:

  • Adjusted Gross Income (AGI) less than or equal to $31,000 for single filers and $62,000 for married filing jointly filers
  • 18 years of age or higher
  • Not a dependent of another individual
  • Not a student

The credit will be based on a percentage (10%, 20%, or 50% based on AGI) of the contribution (up to $2,000 for single filers and $4,000 for married filing jointly filers) into an ABLE account. As a result, the credit is a maximum of $1,000 per year for single filers or $2,000 per year for married filing jointly filers, and may be less or zero depending on the account owner’s AGI and the amount of eligible contributions. You should consult with a qualified tax adviser prior to claiming the Saver’s Credit.

ABLE to Work Act

The ABLE to Work legislation specifies that ABLE account beneficiaries who work and earn income may now contribute over the annual limit of $15,000 into their ABLE account. The additional permissible contribution amount equals the lesser of the individual’s gross income or the amount equal to the federal poverty line set for one person, currently $12,060. This additional contribution over $15,000 is only permitted if the beneficiary is not participating in his or her employer’s work retirement plan.

For more information about ABLE and to find additional resources, including articles, videos, and webinars, visit the ABLE National Resource Center online at ablenrc.org.