Colorado Establishes ABLE Accounts

June 5, 2015

By: Constance D. Smith

Effective June 3, 2015 for tax years beginning January 1, 2015 or later, Colorado has authorized CollegeInvest to implement the federal ABLE Act under Section 529A of the Internal Revenue Code. The bill also excludes from Colorado state taxable income any qualified disability expense distributions excluded for federal income tax purposes.  While this may be a wonderful opportunity to provide better for disabled persons, the program is somewhat limited.

Under federal law, an ABLE account can only be created for a person whose disability occurred prior to age 26. Each disabled person is only permitted to have one ABLE account and only $14,000 can be added to this one account per year, collectively from all donors and sources. Assets held in an ABLE account are not counted for government benefits, but there is a $100,000 cap for SSI purposes.  While qualified disability expense distributions are not counted as income for tax or Medicaid purposes, contributions are not deductible. Any amounts remaining in the account at the disabled person's death will be used to payback Medicaid.

 

This Article is published for general information, not to provide specific legal advice.  The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

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