Ohio families with individuals with disabilities will soon be able to experience tax relief for providing for their loved one. The federal Achieving a Better Life Experience (ABLE) Act, which allows a state to create tax-free savings accounts for individuals with disabilities, became law in December 2014. Subsequently, Ohio House Bill 155 was passed last fall to assist Ohioans with disabilities in maintaining a healthy, independent, and quality lifestyle. The creation of these tax-advantaged savings accounts will allow individuals and their families to save for disability-related expenses without losing their eligibility for certain public benefits.
The accounts in some ways will work like tax advantaged 529 college savings plans. Families will be able to contribute to an account set up for the individual post tax. Earnings on these contributions will be allowed to grow tax deferred (up to a maximum contribution of 414K). Withdrawals made for most services to the individual with disabilities will be tax free. Significantly, assets within an ABLE account will not count against the Medicaid eligibility of the individual. There are some important differences, however, between the ABLE and 529s that are beyond the scope of this article.
Although a firm deadline has yet to be established, the Office of the Treasurer, which is charged with implementing the ABLE program in Ohio, has indicated that they would like to see the accounts available in “early 2016.” CMP intends to provide education before then to help families take maximum advantage of the accounts. For more information or to schedule a presentation, please contact Barry Jamieson at barry@cmpfinancial.com.
Tax Reminders : While the deadline to fund IRAs and HSAs for 2015 is April 18, your 401k/403b and 529 deadline for contributions is the end of the calendar year on 12/31. Note that 2015 and 2016 have the same maximum contribution limits.
2015 and 2016 limits / with catch up
IRA: $5,500 ($6,500 age 50+)
401k/403b: $18,000 ($24,000 age 50+)
HSA, Individual: $3,350 ($4,350 age 50+)
HSA, Family: $6,650 ($7,750 age 50+)
Special note for 529 college education accounts: Computers are now a qualified college education expense again for which you can use 529 proceeds!
