Tax Break: Exemptions for Disability Expenses (H.R. 647)

What is H.R. 647?

(Updated July 13, 2017)

This bill would amend the Internal Revenue Code to allow the creation of tax-exempt “ABLE” accounts for individuals with disabilities. ABLE here stands for "Achieving a Better Life Experience". Under this act, people with disabilities would pay into a state-run ABLE program that would maintain an account for their qualified disability expenses.

Qualified expenses can include education, housing, transportation, obtaining and maintaining employment, healthcare, and other support needs.

For income tax purposes, ABLE accounts would be given the same status as qualified tuition programs. ABLE accounts would also be ignored when determining an individual’s eligibility for federal programs like Medicaid.

As a precaution against hoarding tax-exempt income, this Act would suspend supplemental security income benefits to individuals who have excess funds in an ABLE account

Argument in favor

People with disabilities incur significant additional expenses throughout their lives. This bill spares them from being charged for their disabilities.

Argument opposed

This bill manages to both cut tax revenue and increasing federal spending.

Impact

Individuals with disabilities, the IRS, plus state and local agencies that manage disability programs.

Cost of H.R. 647

The CBO estimates that enacting this bill would increase direct spending by $17.5 billion between 2015-2024. However, the Joint Committee on Taxation (JCT) also estimates that it would cut revenues in the same period by $1.7 billion. Thus, the act would create a deficit of roughly $19 billion over the next 10 years. All that said, the bottom line is that the actual total cost would depend on the number of people who decide to open an ABLE account, and how state and local governments choose to run their ABLE programs.

Additional Info

Media:

Sponsoring Rep. Ander Crenshaw (R-FL) Press Release

National Down Syndrome Society in Support

(Photo Credit: Wikimedia Commons)