Alabama State Treasurer John McMillan has announced that Alabamians are now allowed to deduct contributions to an Alabama ABLE Savings Plan account of an amount up to $5,000 per year, per taxpayer on State Income Taxes. On June 17, 2021, Governor Kay Ivey signed Alabama Act 2021-514 to establish this incentive to aid the disability community in their savings journey.
“We are excited about this tax deduction on contributions as we strive to make saving simple and achievable for everyone in our community,” said McMillan. “As Americans with disabilities continue to grapple with health and financial challenges, one thing is certain — we must expand every and all opportunities for financial stability.”
Alabama ABLE accounts help individuals with disabilities save money without jeopardizing state or federal means-tested benefits such as SSI or Medicaid. Participants may use the savings for a wide range of qualified disability expenses. While the account’s growth is tax-free, qualified withdrawals are also exempt from federal and state income tax.
Representative Danny Garrett, R-Trussville, and Senator Will Barfoot, R-Montgomery, sponsored the legislation in the Alabama Legislature where it passed unanimously.
“I am honored to have participated in passing the ABLE legislation, which will provide assistance to Alabama’s citizens with special needs and disabilities and their families,” explained legislative sponsor, Rep. Garrett. “Having a young adult nephew with Downs Syndrome, our family is aware of the additional expenses and financial requirements that families of people with special needs and disabilities experience in order to provide care and quality of life.”
“The ABLE program is an outstanding resource that enhances the quality of life for certain Alabamians who have disability-related expenses. This bill is significant for both current account owners and potential new account owners because it will provide a sufficient tax deduction to ABLE account owners,” noted bill sponsor Sen. Barfoot. “I appreciate my colleagues in both the Senate and House for their support on this vital piece of legislation, and I thank Treasurer McMillan for his dedication to this impactful program.”
It is important to note that the deduction on contributions is ONLY available to those made to the Alabama ABLE Savings Plan, which is the official and only plan sponsored by the State of Alabama. Alabamians who have an ABLE account other than with the Alabama ABLE Savings Plan, may want to consider transferring their account to benefit from the tax deduction.
For more information about the new Alabama ABLE Savings plan or to learn more about the tax deduction, visit www.alabamaable.gov or call 833-711-2253.