Question

ABLE Accounts are created by whom, and what happens to the income earned within these accounts? What is the required condition for the onset, and what are the specifics regarding contributions – such as who can make them, the type of money that can be used, and any deduction limits?

Answer 1

An ABLE account is created by individuals with disabilities who were diagnosed before the age of 26. The income earned within these accounts is not subject to federal income tax as long as it is used for qualified disability expenses. Contributions can be made by various individuals, but there are annual contribution limits.

Step-by-step explanation:

An ABLE account, also known as an Achieving a Better Life Experience account, is created by individuals with disabilities who were diagnosed before the age of 26. These accounts are meant to help individuals with disabilities save and invest money without jeopardizing their eligibility for various government benefits. The income earned within these accounts is not subject to federal income tax as long as it is used for qualified disability expenses.

The required condition for the onset of an ABLE account is that the individual must have a significant disability that started before the age of 26. This condition ensures that the account is only available to individuals with disabilities who are diagnosed at an early age.

Contributions to an ABLE account can be made by the individual with the disability, family members, friends, or any other person who wants to contribute. The money used for contributions can be from any source, such as earned income, gifts, or inheritances. However, there are annual contribution limits, which vary by state, and any contributions that exceed the limit may have tax implications.