Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 302 - Determination of Net Income › Rule 701-302.81 - Iowa Able Savings Plan Trust

Current through Register Vol. 47, No. 3, July 24, 2024
The Iowa ABLE savings plan trust was created so that
				  individuals can contribute funds on behalf of designated beneficiaries into
				  accounts administered by the treasurer of state. The funds contributed to the
				  trust may be used to cover future disability-related expenses of the designated
				  beneficiary. The funds contributed to the trust are intended to supplement, but
				  not supplant, other benefits provided to the designated beneficiary by various
				  federal, state, and private sources. The Iowa ABLE savings plan program is
				  administered by the treasurer of state under the terms of Iowa Code chapter
				  12I. The following subrules provide details about how an individual's net
				  income is affected by contributions to a beneficiary's account, by interest and
				  any other earnings on a beneficiary's account, and by distributions of
				  contributions which were previously deducted.
(1)
Definitions.
"Account owner"
means an individual who
				  enters into a participation agreement under Iowa Code chapter 12I for the
				  payment of qualified disability expenses on behalf of a designated
				  beneficiary.
"Designated beneficiary"
means an individual
				  who is a resident of this state or a resident of a contracting state and who
				  meets the definition of "eligible individual" found in Section 529A of the
				  Internal Revenue Code.
"Iowa ABLE savings plan trust"
means a
				  qualified ABLE program administered by the Iowa treasurer of state under the
				  terms of Iowa Code chapter 12I.
"Other qualified ABLE program"
refers to any
				  qualified ABLE program administered by another state with which the Iowa
				  treasurer of state has entered into an agreement under the terms of Iowa Code
				  section 12I.10 (see subrule 40.81(2)
				  below).
"Qualified ABLE program"
means the same as
				  defined in Section 529A of the Internal Revenue Code.
"Qualified disability expenses"
means the
				  same as defined in Section 529A of the Internal Revenue Code.
(2)
Contracting with other
				states.
Iowa Code section
				12I.10 allows the treasurer of
				state to choose to defer implementation of Iowa's own qualified ABLE program
				and instead enter into an agreement with another state that already has a
				qualified ABLE program, to provide Iowa residents access to that state's
				qualified ABLE program, provided that the other state's program meets the
				qualifications set out in Iowa Code section
				12I.10(1).
(3)
Subtraction from net income for
				contributions made to the Iowa ABLE savings plan trust or other qualified ABLE
				program.
For tax years beginning on or after January 1, 2016,
				individuals can subtract from their Iowa net income the amount contributed to
				the Iowa ABLE savings plan trust or other qualified ABLE program on behalf of a
				designated beneficiary during the tax year, subject to the maximum contribution
				level for that year. This subtraction is not allowed for any contribution that
				is a transfer from an Iowa educational savings plan trust account and that was
				previously deducted as a contribution to the Iowa educational savings plan
				trust.
(4)
Exclusion of
				interest and earnings on beneficiary accounts in the Iowa ABLE savings plan
				trust or other qualified ABLE program.
For tax years beginning on or
				after January 1, 2016, to the extent that interest or other earnings accrue on
				an account in the Iowa ABLE savings plan trust or other qualified ABLE program
				(if the account owner is an Iowa resident), the interest or other earnings are
				excluded for purposes of computing net income on the designated beneficiary's
				Iowa individual income tax return.
(5)
Addition to net income of amounts
				distributed to the participant from the Iowa ABLE savings plan trust or other
				qualified ABLE program that had previously been deducted.
a. For tax years beginning on or after
				January 1, 2016, if a taxpayer, as an account owner, cancels the account
				owner's account in the Iowa ABLE savings plan trust or other qualified ABLE
				program and receives a distribution of the funds in the account, the amount of
				the distribution shall be included in net income on the account owner's Iowa
				individual income tax return to the extent that contributions to the account
				had been deducted on prior state individual income tax returns of the account
				owner or any other person as a contribution to the Iowa ABLE savings plan trust
				or other qualified ABLE program or as a contribution to an Iowa educational
				savings plan trust account.
b. For
				tax years beginning on or after January 1, 2016, if a taxpayer makes a
				withdrawal of funds previously deducted by the taxpayer or any other person
				from the Iowa ABLE savings plan trust or other qualified ABLE program for
				purposes other than the payment of qualified disability expenses, the amount of
				the withdrawal shall be included in net income on the taxpayer's Iowa
				individual income tax return to the extent that contributions to the account
				had been deducted on prior Iowa individual income tax returns of the taxpayer
				or any other person as contributions to a qualified ABLE program or an Iowa
				educational savings plan trust account.