By Kyle Hilbert, State Representative
The Legislature passed and the Governor signed House Bill 2178, a measure that creates a state income tax deduction for those wishing to contribute to the state program for a better life experience (OK STABLE).
The program enables families whose child has a child with a disability to invest money for their care in such a way that there are special tax advantages.
This legislation will improve the quality of life of eligible people with disabilities.
Eligible are persons who were blind or disabled before the age of 26 and have lived with their disability for at least one year or who are expected to last at least one year. The investment accounts enable qualified persons with disabilities to save and invest money without losing the right to certain public benefit programs such as Medicaid or Supplemental Security Income.
House Bill 2178 was requested by Oklahoma State Treasurer Randy McDaniel.
It is designed to provide an income tax deduction identical to that for contributions to the Oklahoma 529 College Savings Plan, which is overseen by the Treasurer’s Office. The 529 program has been hugely successful in helping parents save up for their children’s college education.
Under current Oklahoma law, contributions were not deductible, but distributions – including income – were tax-free to the designated beneficiary when used to pay qualifying disability expenses.
HB 2178 now allows income tax deduction on STABLE accounts of up to $ 10,000 per individual taxpayer or $ 20,000 for taxpayers filing a joint declaration. The accounts can work with Special Needs Trusts and function like a normal checking account. This enables people with disabilities to be financially independent and self-determined.
Previously, people with disabilities could save only $ 2,000 before they lost on-demand benefits. Oklahoma STABLE enables people with disabilities to save and invest up to $ 15,000 annually without affecting eligibility for certain public benefit programs.
Oklahoma STABLE funds can be used for skilled disability expenses including: education, housing, transportation, health care, assistive technology, employment needs, and basic living costs.
The income in the accounts can grow tax-free and is not subject to federal or state income tax as long as the money is spent on qualified disability expenses.
The program was approved under the bipartisan Achieving a Better Life Experience Act of 2014. Although federal tax law allows ABLE accounts, it is up to the states to set up and manage the program. Oklahoma’s STABLE program began on May 31, 2018.
Accounts that the taxpayer has brought in but not deducted in the tax year for which the contribution is made can be deducted from income for up to five tax years. Deductions may be made for contributions made during the tax year and until April 15 of the following tax year or until the taxpayer’s state income tax return date without renewals, whichever is later.
Under applicable Oklahoma law, interest dividends and capital gains from funds invested in the OK STABLE program are exempt from Oklahoma income tax, as are qualifying distributions from disability savings accounts established under the OK STABLE program in relation to the particular income Beneficiaries.
Data from the Oklahoma State Treasurer’s Office shows there are more than 800 active STABLE accounts in Oklahoma. Hopefully, with the new change in law, even more people with disabilities will have access to these accounts.
I appreciate the work of Senator John Michael Montgomery and our fellow legislators in putting this law into practice. HB 2178 is a bill that will make a real difference for the families and individuals in Oklahoma who need it most.
NOTE: For more information on OK STABLE, visit okstable.org online.
Contact Ellyn Hefner [email protected] about how OKSTABLE works with Special Care Planning.
State Representative Kyle Hilbert, R-Bristow
Senator John Michael Montgomery, R-Lawton.
Ellin Hefner. Photo provided.
The OK STABLE program gives citizens with disabilities and their families who support them access to solid benefits to ensure a better financial future. Photo provided