March 8, 2019
Tax season is in full swing and there is no better time to pick up some ABLE tax savings tips and develop ABLE account savings strategies. Some of the strategies involve tax credits which can easily be overlooked, but reduce the amount of income tax you owe. Better yet, tax credits can also result in a refund. Other deductions can provide even more options for saving!
Did you know that. . . .
- ABLE savings can grow tax-free.
- Some states allow residents a tax credit/deduction for ABLE contributions. You can search for this feature at Compare State Plans.
- ABLE account owners who work and deposit a portion of their earnings into their ABLE account may qualify for the Saver’s Credit.
- Individuals who work and earn income may qualify for the Earned Income Tax Credit.
- Some qualified disability expenses (QDE) may also qualify as taxable deductions for the ABLE account owner who works.
- There are free tax preparation services that can help people who work file taxes:
- Income tax refunds can be directly deposited into ABLE savings accounts.
- Some ABLE account owners receive IRS Forms 1099-QA or 5498-QA from their State ABLE program. These forms show ABLE account contributions and disbursements for the tax year. The information on the forms is in your year-end ABLE account statements, so do not hold up filing your return if you do not receive these forms. You do not have to send the forms with your tax return but hang onto them with the rest of your tax documents. The IRS issued instructions for the forms can be found on irs.gov.
Tax professionals are encouraged to assist qualified individuals with disabilities to enroll in an ABLE plan and have refunds deposited into the ABLE account. Review the ABLE Accounts and Tax-Time Savings Quick Reference Guide for details. IRS Publication 907 provides details of many of these or other highlights for people with disabilities. By claiming all of the credits and deductions for which you are eligible, you can potentially reward yourself with a bigger refund or lower tax liability. Saving your refund in an ABLE account, where it can grow tax-free, provides a safety net in case of emergency and will help you become financially secure.