Individual Development Accounts
Your Opportunity to Build Assets and Maintain Benefit Eligibility
Individual Development Accounts (IDAs) are matched savings accounts that allow individuals with limited income and limited wealth to save money and to build an asset (a first home, business capitalization, or higher education or training). Individual Development Accounts began to receive federal funding in the late 1990s as an asset building strategy for low income, low wealth families. Federal funding for the accounts were provided by two sources, Temporary Aid to Needy Families (TANF) and the Assets for Independence Act (AFIA). Assets accrued in an IDA established using TANF or AFIA money cannot, under Federal regulations, negatively impact an individuals eligibility for federal programs. The individuals contributions, matching contributions, and interest can not be considered as an asset when determining eligibility or benefit levels for federal benefit programs like Social Security, Medicaid, and Food Stamps.
Many IDAs are part of an asset building strategy. The IDA provider may also provide financial literacy, budgeting, credit counseling and/or volunteer income tax assistance (VITA) services. These services provide an individual the opportunity to increase their ability to earn, budget, and save towards their goal. Financial institutions, foundations, churches, private donors, and state and local governments fund the matches to the personal savings of IDA holders (usually at a rate ranging from $1 to $4 for each dollar saved). For example, an IDA program with a 2:1 match would provide $2 for every $1 dollar saved in the IDA, $1000 saved in the IDA would receive a $2000 match.
You can achieve your asset building goals, using an IDA, to purchase a long-term asset such as a home, higher education and training, or a business by completing the following steps:
Step 1: File your taxes
Locate the Volunteer Income Tax Assistance (VITA) Project near you. VITA projects will do your taxes for free, based upon your income. To locate the nearest VITA site, call 1-800-906-9887.
Step 2: Apply for the Earned Income Tax Credit (EITC)
VITA utilizes volunteers trained by the IRS to identify eligibility for tax credits such as the Earned Income Tax Credit. The EITC is a refundable credit. It is based on your income, so even when you have no tax liability, you may receive a tax refund. But, even if you are eligible for the EITC, you will not receive the credit unless you complete Step 1, file your taxes.
Step 3: Open an IDA account
Now that you have received additional funds through your tax return, you can make the first deposit into your IDA account. To locate an IDA program near you, visit the Assets for Independence Resource Center, http://idaresources.org.
Each IDA program has eligibility guidelines that determine the income and asset limits of those who would like to open an IDA. Each program will also have rules that you will need to follow, such as participating in a financial literacy program or saving a minimum amount each month in your IDA account. Each IDA program has counselors to walk you through the process. They want you to be successful and achieve your savings goal.
One rule that many IDA programs have in common is the requirement that you are working and have earned money to build your IDA account. If you are not currently working, but are considering work, now would be a great time to speak with your Vocational Rehabilitation Counselor or other return to work supports about your asset building goals and your goal to work.
Worried about how saving money and building assets will impact your SSI (Supplemental Security Income), Medicaid or other public benefit?
The best thing about an IDA is that IDAs that receive federal funding from Temporary Aid to Needy Families (TANF) or Assets for Independence Act (AFIA) cannot be considered as assets for any Federally funded public benefit. So the money you save does not count against you as an asset or resource.
Once you achieve your goal:
- The full value of your home may not count as a financial asset or resource as long as you live in it.
- Your education and training do not count as a financial asset or resource. They are your intellectual property.
- The full value of your business may not count as an asset or resource, depending on how the business is created.
Schedule an appointment to speak with one of the following resources:
Make an appointment with your Community Work Incentive Coordinator to understand the impact of earnings and savings on your Social Security disability benefits.
Social Security Administration - 1 -800-722-1213
Make an appointment with your Claims Representative or with the Work Incentive Liaison in your local office so that you have a full understanding of your rights and responsibilities.
Please note that only IDA’s that receive federal funding from Temporary Aid to Needy Families (TANF) Block Grants or Assets for Independence Act (AFIA) funds cannot be considered as assets. Please check with your local IDA provider to see if they receive funding from a TANF Block Grant or from AFIA.