Did you know that the CDC (Centers for Disease Control and Prevention) has some staggering statistics related to disabilities in the US.
Were you aware that 26% of American adults have some type of disability? That’s approximately one out of every four people!
From a financial standpoint, this can be a significant concern. For instance, those who are affected, the expenses associated with a disability can be overwhelming. How can you plan for this possibility?
Qualifying for Disability Benefits
The good news is that our government offers benefits programs that provide financial assistance for those with disabilities. If you’re eligible for these programs, there are some tax breaks that can help make it easier for you to save money without affecting your benefits.
However, you can only qualify for these benefits if you have less than $2000 in savings. Federal law requires that disabled recipients live at the poverty level and no more. If you have $2,000 in your checking account, you’re considered overpaid and will be penalized accordingly. If you have multiple accounts, retirement accounts, a house, or other investments, you may be jeopardizing your benefits without even knowing it. How can you plan for the future if you can’t save more than $2000?
The Good News is You Can Get Around This
The good news is there is a way around this. The ABLE (Achieving a Better Life Experience) account. And it happens to be an excellent tax strategy.
People struggling with a disability can take advantage of ABLE accounts. An ABLE account is an investment savings account for people with disabilities that works like a 529 education savings account. There are many benefits to these accounts. It allows those with disabilities to save money without jeopardizing their eligibility for government benefits. And the investments grow tax-free, just like a 529 account.
Some Benefits of an ABLE Account are
These accounts have a lot of great features that can help people with disabilities plan for the future.
You can have up to $100,000 in these accounts without compromising your government benefits. Contributions are not tax deductible. But like a Roth IRA, the money in these accounts grows tax free. And withdrawals are tax free.
Who is Eligible to Own an ABLE Account?
An ABLE account can be established by a person with a disability. Or if they need assistance, their family members, friends, or others can apply on behalf of an eligible individual. So, how does a beneficiary qualify for an ABLE account? An eligible individual must meet the following criteria:
- be eligible for Supplemental Security Income (SSI) based on disability or blindness that began before age 26.
- be entitled to Social Security Disability Insurance benefits (DIB), childhood disability benefits (CDB), or disabled widow’s or widower’s benefits (DWB) based on disability or blindness that began before age 26.
- if a person has certified, or if they have a parent or guardian that has certified, that they met the criteria for a disability certification before they turned 26.
For individuals who are eligible to participate in ABLE accounts, there are no residency or age restrictions. There may also be other ways to qualify to open an ABLE account. Contact your state’s program administrators for more information about qualification criteria.
Wasatch CPA Services: Providing Tax Planning and Disability Benefit Tips
When you have a disabled family member, it’s important to explore their financial options. You’ll also want to make sure they have a good tax planning strategy.
Unfortunately, most people don’t know about these disability savings options. This is simply because most accountants and financial advisors aren’t familiar with them either. But, with the Centers for Disease Control and Prevention’s staggering statistics related to disabilities in the US, it’s time more people get educated.
If this applies to you and your accountant hasn’t discussed it with you, it’s time we talk. If you are concerned about your government disability benefits, reach out to a representative from Wasatch CPA Services today. We can help answer any of your questions. Above all, we can discuss with you how you can save money without compromising your government disability benefits.