Setting Up Your Account
While you’re enrolling, you can choose to save your money in a cash option, invest it, or both. Keep in mind that if you decide to split your contributions between the cash and investment option, you’ll need to put at least 10% of your funds in the investment option.
Remember: $25 is the minimum deposit required to open a Maryland ABLE account with a $10 minimum for any contribution or withdrawal after that.
The online platform is powered by Sumday, the Maryland ABLE program administrator, to securely connect your ABLE and bank accounts while protecting your information.
This platform makes it easy to add money whenever you want, however you want — via individual transactions or monthly automatic transfers — to help you reach the yearly contribution maximum ($14,000 for 2017, and increasing to $15,000 for 2018). Friends and family can also add money via gift contributions, but each account can only receive contributions from all sources up to a total of $14,000 in 2017 and $15,000 in 2018.
Tracking your expenses
While we don’t need to see your receipts for qualified disability expenses, the IRS might. So, in addition to tracking your spending in the online expense tracker, it’s best to keep documentation for your eligible purchases.
Keep in mind: For all ABLE account funds that are spent on non-eligible expenses, you will have to pay taxes on the growth, plus a 10% penalty on those earnings. Also, keep in mind that any non-qualified withdrawals are considered income for that month and could count against your eligibility for SSI benefits or Medicaid.
Tax Advantages of ABLE Plans
Both the earnings from your ABLE account and the money you withdraw are tax free when used for qualified disability expenses. For Maryland taxpayers, contributions to your account could qualify for an income deduction. Each contributor may deduct up to $2,500 a year (for single-filers and $5,000 for joint filers) on their State taxes for each Beneficiary to whom they contribute. For example, if a Maryland taxpayer contributes $2,500 to beneficiary A’s ABLE account, and $2,500 to beneficiary B’s ABLE account, they may be eligible to subtract $5,000 from their federal adjusted gross income to determine their Maryland adjusted gross income.
Remember, if you or your beneficiary live outside of Maryland, you should consider before investing whether your state or your beneficiary's state offer state tax or other benefits for investing in its ABLE plan.