Disabled Can Use ABLE Account Tax Break for Housing

[ad_1]

Disabled Americans face many financial hurdles, and the high cost of medical care may be the biggest.

But when the disabled need to access assistance programs in order to pay for that medical care, there are often asset tests that limit the amount they are allowed to have in savings. And sometimes even the amount they are allowed to earn.

This post will introduce one of those rare silver linings in disability finance. We will show how to use an ABLE account to make housing costs deductible on tax returns in the states that allow this deduction. The money saved can be ued for medical costs or any other expenses.

How to Lower Your State Tax Burden by Paying Rent

The primary purpose of an ABLE account is to help qualified people get around those asset tests. Money saved in an ABLE account cannot be counted against the disabled when applying for SSI, Medicaid or a number of other social programs, as long as the balance is under $100,000.

In addition to the perks of sheltering your assets, ABLE accounts also provide great tax benefits. As long as the money is used for qualified expenses, you won’t pay any taxes on interest accrued. And in some states, your contributions are even tax deductible.

Pro Tip

An ABLE account can be opened at any age. However, the applicant must have been age 26 or younger at the onset of their disability to qualify.

Another thing that makes ABLE accounts stand out is that one of their qualified expenses is housing costs. Even a Supplemental Needs Trust cannot be used to pay for housing expenses, so this is a huge deal.

This allows you to strategize your contributions and expenses to pay things like your rent or mortgage. In some states, those contributions will be 100% deductible on your state tax returns.

Let’s Run the Math

Pennsylvania is one of two states — the other is Mississippi — that gives a dollar-for-dollar deduction for contributions to an ABLE account so we are using guidelines there for…

[ad_2]

Source link