The Arc Responds to Senate Passage of the Tax Cuts and Jobs Act “Each vote in favor of this bill was a vote against constituents with disabilities”

Washington, DC – The Arc released the following statement in response to Senate passage of the Tax Cuts and Jobs Act:

“Today both chambers of Congress rushed to pass an irresponsible tax plan. By reducing revenue by at least $1.5 trillion, the Tax Cuts and Jobs Act increases the pressure to cut Medicaid and other programs that are critical to the lives of people with intellectual and developmental disabilities. Each vote in favor of this bill was a vote against constituents with disabilities and sets the wheels in motion to quite possibly go back in time to an era when people with disabilities had little opportunity to live a life of their choosing, in the community.

“The Tax Cuts and Jobs Act was crafted behind closed doors and the final draft of this bill was only released publicly on Friday. The rush by the Senate to pass this bill mere hours after the House of Representatives vote makes it clear that the architects of this bill were trying to hide something from the American public.

“This year the disability rights community has endured ongoing Congressional attacks that could have jeopardized the health and well-being of individuals with intellectual and developmental disabilities. And now, thanks to the enormous revenue losses that will be created by this bill, we must prepare to protect critical programs like Medicaid which will likely be on the chopping block in 2018. We are grateful to the Members of Congress who stood up for their constituents with disabilities by opposing this bill and we look to them as our greatest allies as our fight continues. While this bill must return to the House of Representatives once more, it is expected to be signed into law. Passage of this bill will not change the resolve of The Arc’s network. As we have shown time and time again, we are a force to be reckoned with. We will remain active in our opposition to attacks on the basic rights and health of people with disabilities and their families,” said Peter Berns, CEO, The Arc.

The Arc Responds to House of Representatives Passage of the Tax Cuts and Jobs Act – Services and Supports for People with Disabilities at Risk

Washington, DC – The Arc released the following statement in response to House passage of the Tax Cuts and Jobs Act:

“Once again the House of Representatives has taken a dangerous step towards cutting the services and supports that people with disabilities rely on to be a part of their community. This year we’ve endured ongoing Congressional attacks on critical programs for people with disabilities. And now, thanks to the enormous revenue losses created by this bill, we will prepare to protect critical programs like Medicaid which will likely be on the chopping block in 2018.

“This version of the Tax Cuts and Jobs Act, which is the result of a conference between the Senate and House of Representatives, was only released publicly on Friday evening. With the Senate rushing to vote on this bill less than 24 hours after the House passage, it seems that Congress is trying to hide something from the American public.

“This bill is the latest attack from Congress on the health and wellbeing of their constituents with disabilities.  Now we turn to the Senate, our last line of defense. We implore Senators to do the right thing and oppose this bill. We continue to encourage disability advocates across the country to reach out to their Senators to voice their concern about this bill, but emphasize that time is of the essence.  The disability community has fought against threats to vital programs and won several times this year, and we are not backing down when it comes to irresponsible tax policy like this,” said Peter Berns, CEO, The Arc.

The Tax Cuts and Jobs Act, ignores concerns that constituents with disabilities across the country have been raising to their Members of Congress for weeks. The Arc’s longstanding position on tax policy is that it should raise sufficient revenues to finance essential programs that help people with disabilities to live and work in the community. The Arc also supports tax policy that is fair and reduces income inequality as people with disabilities are twice as likely to experience poverty. This legislation fails to meet either standard.

Additionally, the repeal of the Affordable Care Act’s individual mandate will result in 13 million fewer Americans with health coverage, including those with disabilities, and will increase premiums for people buying insurance on the health insurance exchange.

About The Arc

The Arc advocates for and serves people with intellectual and developmental disabilities (I/DD), including Down syndrome, autism, Fetal Alcohol Spectrum Disorders, cerebral palsy and other diagnoses. The Arc has a network of more than 665 chapters across the country promoting and protecting the human rights of people with I/DD and actively supporting their full inclusion and participation in the community throughout their lifetimes and without regard to diagnosis.

#HandsOff: Jake’s Story

###This is the first installment of a new series at The Arc Blog called #HandsOff. Each month, we will feature a story from individuals and families across The Arc’s network about their experiences with some of today’s key policy issues impacting people with disabilities. ###

Jake and Melinda

The author, Melinda, and her brother-in-law, Jake

My name is Melinda and I live in Monroe, North Carolina. I am terrified that the tax plan that Congress is pushing through will lead to cuts for critical programs that people with disabilities rely on. My brother-in-law, Jake, is 36-years-old and my reason for speaking out.

In 2005, my husband and I invited his 24-year-old brother, Jake, from Alabama to live with us in North Carolina in our home. Jake has an intellectual disability as well as some additional mental health issues. While he has significant challenges in daily living as well as academic skills, Jake has incredible working memory, is completely mobile, and articulates every want and need he has; he strives for full independence in the world.

Though we had just had our second child that year, my husband and I made a conscious decision to take on the role as the support system for Jake rather than continue to expand our family. We wanted to do whatever we could to help him lead an independent, meaningful life, something that did not always happen when he was living in his mother’s basement in Alabama. To accomplish this goal, which is ongoing and cyclical, we have spent the last twelve years learning the process of getting supports and services.

I knew nothing about Medicaid or how it could change the life of someone like Jake until we got him a coveted waiver spot for short-term support. Because of these supports, Jake is able to live by himself in a small apartment directly across the street from our house. He has full access to the community and the supports that he needs. My husband and I help to manage the people that work with Jake, but he is the one that drives his own services. He works every day on the goals he decided would help him towards independence: preparing his own meals, advocating his needs to his landlord and others, spending money within a budget, and maintaining his own living-space. Jake has also made meaningful connections with people in our broader community- people other than his family and support staff who look out for him and value his friendship and contributions.

My family structure is in balance because of Medicaid; without it, Jake’s world looks very different, and frankly, so does mine. My husband can continue working as a high school principal. I can continue working at my job as a clinical social worker and full-time advocate for people with intellectual and developmental disabilities. Our two teenaged daughters have the space they need to grow without always having to share time and attention with their uncle. Most importantly, Jake has the life he never thought was possible.

Clearly, our entire family would be greatly impacted if Jake lost his Medicaid services. The tax plans moving through Congress dramatically reduce the revenue that the federal government uses to pay for critical programs such as Medicaid. Act now by calling your Members of Congress to ask them to oppose this dangerous bill.

Jake and his family

Kevin, Melinda, Jake, Georgia, and Juliet Plue

The Arc Responds to Senate Passage of the Tax Cuts and Jobs Act – Services and Supports for People with Disabilities at Risk

Washington, DC – The Arc released the following statement in response to Senate passage of the Tax Cuts and Jobs Act:

“Today the Senate took a big and dangerous step closer to cutting the services and supports that people with disabilities rely on to be a part of their community.

“The Arc’s longstanding position on tax policy is that it should raise sufficient revenues to finance essential programs that help people with disabilities to live and work in the community. The Arc also supports tax policy that is fair and reduces income inequality; people with disabilities are twice as likely to experience poverty.

“Both the House and Senate versions of the Tax Cuts and Jobs Act fail to meet either standard. By reducing federal revenue by at least $1.5 trillion, the Senate bill turns up the pressure on Congress to cut Medicaid and other programs that are critical to people with intellectual and developmental disabilities.

“Additionally, the repeal of the Affordable Care Act’s individual mandate will have a dire impact on nearly 13 million Americans, including those with disabilities, and will increase premiums for people buying insurance on the health insurance exchange.

“The disability community has fought against threats to vital programs and won several times this year, and we are prepared to do it again. As the House and Senate finalize the bill, we encourage our advocates across the country to act now. We’ve shown again and again this year our strength, and now we have to do it again, or we will be right back where we started in the coming new year,” said Peter Berns, CEO, The Arc.

 

About The Arc

The Arc advocates for and serves people with intellectual and developmental disabilities (I/DD), including Down syndrome, autism, Fetal Alcohol Spectrum Disorders, cerebral palsy and other diagnoses. The Arc has a network of more than 665 chapters across the country promoting and protecting the human rights of people with I/DD and actively supporting their full inclusion and participation in the community throughout their lifetimes and without regard to diagnosis.

Why the Tax Cuts and Jobs Act is Bad for People with Disabilities

Legislative Timeline

House of Representatives

  • Nov. 16: House passed its version of the Tax Cuts and Jobs Act

Senate

  • Week of Nov. 27: Senate plans to vote on its version of the Tax Cuts and Jobs Act
  • 51 votes are needed to pass the legislation

Background

The Arc’s longstanding position on tax policy is that it should raise sufficient revenues to finance essential programs that help people with disabilities to live and work in the community. The Arc also supports tax policy that is fair and reduces income inequality; people with disabilities are twice as likely to experience poverty.

Unfortunately, both the House and Senate versions of the Tax Cuts and Jobs Act (H.R. 1, Senate Version) fail to meet either standard. Both bills would dramatically reduce revenue that the federal government uses to pay for critical programs. As the tax revenue decreases it will likely build pressure to cut Medicaid, Medicare, Supplemental Security Income, and other critical programs for people with disabilities to make up for lost revenue.

Why is the Tax Cuts and Jobs Act Harmful?

Congressional BudgetThe House and Senate bills reduce federal revenue by about $1.5 trillion over 10 years. Members of Congress have acknowledged that passing these tax cuts will make it easier to justify spending cuts down the road. The Congressional Budget Office (CBO) also notes that automatic spending cuts may be triggered if Congress does not act to prevent them. These automatic cuts could mean a $25 billion dollar cut to Medicare in 2018. Automatic spending cuts could also slash funds that go to states to operate critical programs such as the Vocational Rehabilitation state grant program and the Social Services Block Grant.

How Do the House and Senate Bills Compare?

The Arc opposes both the House and Senate bills. The chart below is meant to explain the differences between the two bills.

In House Bill In Senate Bill
Repeal of Individual Mandate for health insurance coverage. CBO estimates 13+ million fewer people with health insurance andpremium hikes of 10% in the insurance marketplace. The individual mandate helps ensure that enough healthy people purchase health insurance to keep insurance affordable. x
Repeal of the medical expense deduction. Nearly 9 million filers claim this deduction for medical care expenses that exceed 10% of an individual’s or family’s adjusted gross income. It offsets some of the high out of pocket medical expenses that some people with disabilities incur, such as high cost prescription drugs, long term  physical and occupational therapies, wheelchairs, prosthetics, and long term supports and services. x
Repeal of the Disabled Access Credit (DATC). The DATC assists small businesses in meeting obligations under the Americans with Disabilities Act (ADA). It allows small businesses (with < 31 employees and gross receipts < $1 million a year) to claim a tax credit. The credit provides 50% of eligible expenditures between $250 and $10,000 for a maximum of $5,000. x
Repeal of the Work Opportunity Tax Credit (WOTC). WOTC is available to employers for hiring individuals from certain target groups, including people with disabilities. The WOTC for people with disabilities provides a credit for up to 40% of the first $6,000 in wages, for a maximum of $2,400 for SSI beneficiaries but up to $9,600 for certain disabled veterans. x
Reduce affordable housing production under the Low-Income Housing Tax Credit (LIHTC) program. LIHTC funds the creation of affordable housing across the country. Both the House and Senate bills would make changes to the LIHTC program that would reduce the number of affordable housing units produced. Changes proposed by the Senate bill are estimated to reduce units produced by roughly 300,000 over the next 10 years. The House bill has proposed even more dramatic changes, estimated to reduce units produced by nearly 1 million over the next 10 years. x x
Reducing incentives for charitable deductions. Raising the standard deduction could reduce the number of taxpayers who itemize deductions – including charitable donations – from the current 30% to 5%. Combined with a decrease in the top marginal tax rate, the disincentive to itemize would reduce charitable giving by $4.9 billion to $13.1 billion annually. Many of the providers of services to people with disabilities are non profits that rely on charitable giving. x x
Repeal or limit Orphan Drugs Credit. Businesses can receive this credit for clinical testing expenses for certain drugs for rare diseases or conditions. It is estimated that if the orphan drug credit were repealed one-third fewer drugs addressing rare diseases would be developed in the future. x
Repeal
x
Limit
Creation of an inadequate paid leave tax credit. The Senate bill would create a two-year employer tax credit for paid family and medical leave expenses, modeled after the Strong Families Act. As structured, this tax credit is likely to primarily subsidize companies that already offer paid leave or that would have chosen to offer new or expanded paid leave benefits without a tax credit. This means that, in addition to losing revenue, the proposal would do little to reduce current gaps in access to paid leave that particularly impact workers with disabilities and their families. x

 

The 2018 Congressional Budget and Tax Cuts – What It Could Mean for People with Disabilities and What We Must Do

The CapitolThis year’s Congressional budget process is particularly important for people with disabilities and their families. The recently-passed House and Senate fiscal year 2018 budgets set overall spending and revenue targets for the next 10 years. But beyond this basic function, Congressional budget writers have been clear that an underlying goal of the 2018 budget is to set the stage for a massive tax cut bill.  The Arc is concerned that significant loss of federal revenue will result in cuts to programs for people with disabilities

The Senate passed its Budget on October 19 and the House passed the same Senate Budget a week later. House Speaker Paul Ryan (R-WI) is aiming to pass a tax cut bill before Thanksgiving that, under budget rules, can be passed by a simple majority vote in the Senate. A great deal is at stake. Here’s what it could mean for people with disabilities, and what we must do.

What is in the Congressional Budget?

Congressional BudgetThe Budget allows for up to $1.5 trillion to be added to the deficit over 10 years. Congressional committees are now drafting tax cut legislation that does not have to be paid for unless it goes above $1.5 trillion. But if the cost of tax cut legislation goes above that amount, then any amount over that could come directly from cuts to Medicaid, Medicare and many other programs that are critical for people with disabilities. The Budget assumes, but does not require, some $5 trillion in spending cuts over 10 years, as well as optimistic projections of economic growth, to make up for lost tax revenue.

What Do We Know About the Proposed Tax Cuts?

While the tax cut legislation has not yet been developed, the tax plan framework released by President Trump and key Congressional leaders in September indicates that its benefits may be heavily tilted towards wealthy individuals and corporations. Several types of taxes that it proposes to eliminate or reduce are only paid by very wealthy households, such as the estate tax that is only paid by individuals with estates worth over $5.5 million. See The Arc’s statement on the tax framework.

What Will The Arc Be Watching Out For?

At this point there are many unknowns. Here are five things that The Arc will be watching out for:

  1. Cuts To Medicaid, Medicare, Supplemental Security Income (SSI) or Other Critical Programs To Pay For Tax Cuts. The Budget instructs the Senate Finance Committee and the House Ways and Means Committees to develop legislation. In addition to taxes, the Senate Finance Committee has jurisdiction over many critical programs, including Medicaid, Medicare, SSI, Temporary Assistance for Needy Families, Child Welfare Services, Maternal & Child Health, the Social Services Block Grant, the Independent Living Program, and more. Therefore, the Committee may choose to draft a bill that cuts any of these programs and this bill could be passed with only a simple majority (51 Senators, or 50 Senators plus the Vice President) in the Senate rather than the 60 votes that are usually needed.
     
  2. Loss of Revenue that Sets the Stage for Cuts to Essential Programs. The Senate Finance Committee and House Ways and Means Committees could also choose to draft bills that only contain tax cuts. As noted earlier, budget rules allow for tax cuts that could increase the federal deficit by up to $1.5 trillion. Many members of Congress who favor tax cuts also favor cuts to programs such as Medicaid and Medicare. The Arc is concerned that passing a large tax reform bill that increases the deficit will make it easy to justify spending cuts down the road.
     
  3. What Happens with Tax Breaks.

    Tax Expenditures that Benefit
    People with Disabilities:

    • Standard deduction for people who are blind
    • Architectural and Transportation Barrier Removal Deduction
    • Disabled Access Credit
    • Work Opportunity Tax Credit
    • Impairment-Related Work Expense Deduction
    • The Low-Income Housing Tax Credit
    • Achieving a Better Life (ABLE) Tax Advantaged Savings Accounts

    For many years, supporters of tax cuts have called for the elimination of certain tax expenditures, also called tax breaks. If certain tax breaks are eliminated, the argument goes, then tax rates can be lowered for most people. In other words, getting rid of some tax breaks can pay for the desired tax cuts. However, not all tax breaks are alike. In fact, there are numerous tax expenditures, which come in the form of credits, deductions, exclusions, exemptions, preferential rates, or deferrals of tax liability. These tax expenditures presently total $1.5 trillion. The Arc will advocate to maintain expenditures that benefit people with disabilities and their families and oppose the elimination of those that only affect the most prosperous.Additionally, The Arc will work to ensure that tax provisions that could be harmful to people with disabilities are not included. For instance, we oppose education tax credits that reduce federal revenues in order to subsidize education in private schools that are not bound by the Individuals with Disabilities Education Act (IDEA) to provide needed services.

  4. US MapBasic Fairness. We expect that changes to the tax code should primarily benefit the majority of people living in the U.S., namely those with low and middle incomes. Public opinion polls show that sentiment is shared broadly. 62% of Americans actually favor increasing taxes on the wealthy, according to the most recent Wall Street Journal poll. However, this does not appear to the case in the tax reform framework, with families in the lower rungs showing only slight gains. The top 1 percent of households, however, are projected to receive 80 percent of the tax cuts by 2027. Click on the map at right to see average tax changes by income group in each state under the proposed framework.
     
  5. Mainstream Economics – Real Numbers and Real Issues. Tax cuts should be based on generally accepted economic theory and methodology. The Arc is concerned that controversial methods, such as dynamic scoring, will be used to overstate the economic benefits of enacting tax cuts. We also know from recent and historic examples that tax cuts have often not yielded promised results and have instead resulted in increased deficts and harmful programs cuts. The Kansas tax cuts provide a cautionary tale.
     

For more information, see:

The Arc’s Statement on the Tax Reform Outline

The outline for tax reform released by the White House and leaders from two Congressional committees this week is long on promises and short on details. What is clear, however, is that this plan will rapidly deplete our federal revenues, the very resources that pay for programs that people with disabilities rely on to live in their communities. The fiscally conservative Committee for a Responsible Federal Budget estimates that the new plan could cost the country $2.2 trillion in lost revenue over a decade. This will leave states with far fewer federal dollars to help cover the costs for services for people with disabilities. The Administration and Congressional leaders have not indicated how they intend to pay for this tax proposal, aside from eliminating some expenditures.

We cannot morally or financially afford this tax plan that overwhelmingly benefits the wealthiest of our citizens and ramps up the pressure to cut federal spending down the road. The nation will likely pay for this unfair tax plan through massive budget cuts to programs that people with disabilities and others need for survival and basic necessities.

The President and Members of Congress should now understand the backlash that follows direct attempts to cut essential programs for people with disabilities and other large constituencies. Just this week, massive grassroots opposition to cuts to the Medicaid program stopped the latest attempt to overhaul our health care system.

And now, just days later, a new assault is likely hatching on Medicaid and other vital programs that ensure the health and wellbeing of people with disabilities. This time, however, the attack is indirect and seeks to lure with false promises. But people with disabilities and their families will be paying close attention to make sure that tax cuts are not paid for by in the long run by cuts to critical programs.

Nuts & Bolts of Income Tax for Individuals with Disabilities and Their Families

By Elizabeth L. Gray, CELA, Special Needs Alliance®

As we approach tax season, it is important to understand the different tax credits, deductions, and liabilities affecting individuals with disabilities and their families.  This is a complicated subject. This article provides general information.  If you would like to get advice for your situation, you should consult a professional with knowledge of both taxation and special needs planning.

Claiming a Dependent

The IRS defines an individual with disabilities as someone with a permanent and total disability that results in the inability of that individual to engage in any substantial gainful activity. A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Substantial gainful activity is considered the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Full-time work (or part-time work done at the employer’s convenience) in a competitive work situation for at least the minimum wage conclusively shows that the individual is able to engage in substantial gainful activity.

You can claim an individual with disabilities as a dependent when:

  • they have lived with you for more than half of the tax year;
  • you have provided at least  half of their support for the tax year; and
  • they are your child, stepchild, foster child, or a descendant of these; or
  • your brother, sister, step-sibling, father, mother, grandparent or other direct ancestor of yours.
  • they are not filing a tax return of their own.

Tax Credits and Exemptions

  • Child tax credit – For each “qualifying child” who will be under the age of 17 at the end of the year, you may take up to a $1,000 credit, based on a sliding income scale.
  • Child and dependent care tax credit – This helps to defray the cost of care services needed in order for you and (if you’re married) your spouse to work. Married persons must both work, or one must work while the other is a full-time student, has a disability, or is looking for work (provided that the spouse looking for work has earnings during the year).  There is no income ceiling on this credit, which can equal 20-35 percent of expenses incurred, up to $3,000 for one qualifying individual, and $6,000 for two or more qualifying individuals. People with higher incomes get a smaller credit than those with more modest incomes.
  • Earned income credit – This is available for people who work and have a child meeting the dependent qualifications previously described. The child must be under 19, a full-time student under 24, or have a permanent and total disability
  • Personal exemption for dependent – The maximum allowable for tax year 2016 is $4,050.The dependent’s gross income for the tax year must be less than $4,000.  Gross income does not include income from services the person performs at a sheltered workshop.

Medical Deductions

The following deductions should be considered both by adults claiming a dependent and by individuals with disabilities who are filing for themselves. For most individuals, these medical expenses are deductible only when they exceed 10 percent of the taxpayer’s adjusted gross income. Until tax year 2017, a 7.5 percent threshold applies to filers who are 65 and older. Typical examples include:

  • Unreimbursed health care expense – Must total more than 7.5 percent of adjusted gross income. Remember to include travel expenses to and from medical treatments, certain insurance payments from already-taxed income (i.e., long-term care insurance), uninsured medical treatments (eyeglasses, contact lenses, false teeth, hearing aids), laser vision corrective surgery, and most medically necessary costs prescribed by a doctor. For example, if the doctor prescribes a humidifier for the home to help with chronic breathing problems, the device and the additional electricity costs to operate it, could be partially deductible.  Remember to keep all receipts for any special medical needs.
  • Special schooling, training, or therapy, including medically recommended exercise programs.  This includes amounts paid for meals and transportation.
  • Aides required for the dependent to benefit from his or her education.
  • Diagnostic evaluations.
  • Certain home improvements and/or modifications required as a result of your dependent’s condition.
  • Special medically recommended diets.
  • Conferences and seminars that are medically recommended and that deal specifically with the medical condition the child has, and not just general health and well-being. Unfortunately, this does not include deductions for meals and lodging incurred while attending the conference or seminar.

Considerations When Filing for Yourself

If you receive Supplemental Security Income (SSI) payments, those benefits are not taxable. In addition, the SSI payments do not get included in Social Security benefits.

What about regular Social Security or Railroad Retirement benefits? Part of the amount received may be taxable. Generally, if the only income received during the year was Social Security or Railroad Retirement, then the amount would not be taxable. However, if an individual received income during the year in addition to Social Security or Railroad Retirement, then half of the Social Security benefits plus the other income may be taxable, depending on your filing status (individual, head of household, etc.) and the total.

If you are receiving disability benefits under a disability retirement plan that was funded by your employer, those benefits are considered earned income until you reach your minimum retirement age. However, payments received from a disability insurance policy under which you have paid the premiums are not earned income.

Other considerations include:

  • Impairment-Related Work Expenses deduction – This is for attendant care services necessary for you to maintain employment. Such services qualify as a trade or business expense. This is available only if the you have a physical or mental disability that is a functional limitation to employment or that substantially limits one or more major life activities (i.e., walking, speaking, performing manual tasks, breathing, learning, or working).
  • Elderly and disabled tax credit – Available to every U.S. citizen, who is 65 or older at any time during the tax year. Tax payers who are under 65 may claim the tax credit if they are retired on permanent and total disability under an employer’s plan, or if they receive taxable disability income during the year and do not reach mandatory retirement age by the first day of the tax year.

Special Needs Trusts and ABLE Accounts

Special needs trusts (SNTs) and ABLE accounts are two important financial planning tools that can significantly contribute to an individual’s quality of life. It is important to understand tax liability for each.

Special Needs Trusts

Income generated by a SNT is taxable and trust expenditures are eligible for deductions, but who is liable depends upon the type of trust involved:

  • A third party trust is set up by an individual for the benefit of someone else (for instance, a parent may establish a trust for a child). When the trust is revocable, meaning that the person who created it can make changes, it is considered a grantor trust and taxes are paid by the person who established it. Once the trust becomes irrevocable, it must report any taxable income or gross income of $600 or more in a given tax year. The trust may either pay the tax itself or issue a form facilitating payment by the beneficiary. Issuing the form to the beneficiary may not be a bad thing because trust tax rates are high, while the beneficiary may be in a low-income tax bracket. Given the personal exemption and, in many instances, the standard deduction, no tax payment may be due. Distributions that represent trust income become a tax liability for the beneficiary.
  • First party trusts, created with funds belonging to the beneficiary with disabilities, are automatically considered grantor trusts in most states (in some locations, it may be necessary to add appropriate language to the trust document), so the beneficiary is responsible for taxes.
  • If an SNT is structured as a qualified disability trust, it may be eligible for larger exemptions. In addition to other requirements, the trust must be irrevocable, and the beneficiary must be under 65 when the trust is created.

ABLE Accounts

As a quick reminder, ABLE (Achieving a Better Life Experience Act of 2014) accounts are modeled after the Section 529 savings accounts and enable certain individuals with disabilities to save funds without endangering their eligibility for means-tested government benefits. Contributions to an ABLE account are not tax-deductible and are made with after-tax dollars. However, ABLE account earnings grow tax-free unless distributions in a given tax year are not made for the designated beneficiary’s qualified disability expenses. Qualified disability expenses consist of a wide range of expenditures: education, housing, transportation, employment training and support, assistive technology and personal support services, health prevention and wellness, and more. In addition, distributions for qualified disability expenses are not considered income.

This overview is not intended as tax advice. Individuals with disabilities and their families should consult a tax professional about their specific circumstances.

 

The Special Needs Alliance (SNA)® is a national non-profit comprised of attorneys who assist individuals with special needs, their families, and the professionals who serve them. SNA is partnering with The Arc to provide educational resources, build public awareness, and advocate for policies on behalf of people with intellectual/developmental disabilities and their families.