Congress has passed two bills that are expected to be signed by the President into law.
The first is the Achieving a Better Life Experience Act or ABLE. This act is to help those with disabilities and their caregivers to save and provide for education, housing and medical expenses in the future.
“In short, the ABLE Act lets those with disabilities set up tax-free savings accounts to help them manage the costs of medical care, housing, transportation and continued education,” said House Ways and Means Committee chairman Dave Camp, R-Mich., in a statement. “This will allow those who are on Medicaid and SSI to work, earn, and save more while still receiving those important benefits. It is important to note that these savings accounts will be available to all individuals with disabilities and their caretakers, not just those on Medicaid or SSI.”
Some of the details of that act are for children and adults whose disability occurred before age 26 and who meet the SSI program’s disability standard would be eligible to open one ABLE account in their state of residence.
Anybody would be allowed to open and contribute to an ABLE account on behalf of the eligible beneficiary, but each beneficiary is restricted to one ABLE account. These would be called a 529A account under the same IRS code of college savings plans. Similar to 529 plans except there is no state tax deduction, the account would just grow tax free, like a Roth IRA.
The contributions are still limited and contributions from family members and friends are restricted to the annual gift tax exemption, which is $14,000 in 2014.
Account funds could be used to pay for a broad range of eligible expenses, including for education, housing, transportation, health, and other items as established by the Secretary of the Treasury in regulation.
The second bill is the extension of some tax extensions that expired in 2013. This includes the home mortgage deduction, deduction for qualified tuition and expenses, school teacher expense deductions and some energy credits.
Individual tax rates will remain the same. For more details on these bills, check out Passage of tax extenders.