Is a PA ABLE Account Right for You?
Selena is a 24-year-old young woman who happens to have autism and an intellectual disability. Because of her disabilities, she has a Person/Family Directed Support Waiver and Medical Assistance.
Selena has worked for 6 years as a part-time employee at a print shop in Camp Hill, PA. She is interested in getting a full time job and in buying a car so she can have more independence traveling to work.
Since Selena has a waiver and receives Medical Assistance, regulations prohibit her from having more than $2,000 in assets (i.e., money in checking or savings accounts, etc.). Right now, she keeps the money she is saving to buy a car in a box under her bed. She would rather have it in a safe place where she can get it when she needs it to buy a car! Selena would like to have a savings account, like her sister, but her family knows that if she has more than $2000 in assets she may lose her government benefits.
In PA, Selena could open a PA ABLE account to save money and withdraw it when she needs it for a qualified disability expense.
PA ABLE accounts offer a tax-free way to save money for disability-related expenses. It allows a person with a disability to save up to $15,000 each year while keeping disability-related benefits, such as Social Security Income and Medical Assistance.
Frequently asked questions about PA ABLE:
- What is a PA ABLE account and who can have one?
- A PA ABLE account gives individuals with qualified disabilities, and their families and friends, a tax-free way to save for disability-related expenses, while maintaining government benefits. This means that it is a savings plan that protects public benefits. The PA ABLE website also offers an eligibility quiz!
- How to use a PA ABLE account:
- You can contribute up to $15,000 each year, or contribute more with earned income up to an account maximum balance of $511,758
- Once the account limit is reached, no additional contributions can be made, but interest can still be earned
- Families and friends can also contribute to a PA ABLE account
- Learn more about these restrictions in Cents and Sensibility, a book put together by the Pennsylvania Assistive Technology Foundation and on the PA ABLE website.
- What are the tax advantages to having a PA ABLE account?
- you don’t owe federal or Pennsylvania income tax on saving’s growth when held in the account – meaning you defer paying taxes on it,
- when you withdrawal for “qualified disability expenses” you can get a tax exemption, and
- the entire account is exempt from Pennsylvania inheritance tax.
For more resources about PA ABLE check out the links below: