Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

03/16/2010
More information on Individual Development Accounts.
Are IDAs managed by the individual account holder or by the matching financial institution? Will the IDA account earn interest? If so, will the individual have to file that as part of their tax return?
Elizabeth Jennings:
The IDA account is managed by the grantee that holds the IDA program. This would be the organization that is running the IDA program in your area. For example, in your community your local United Way might be the group that runs the IDA program. They would be the conduit between the individual and the bank and would be the one setting up the IDA account with the bank. An individual person would have their own individual account, but it is primarily managed through the IDA provider.

The benefit to the bank is that when the individual is successfully an IDA user and owns that asset, they typically now feel they have a relationship with that bank, so they want to stay with that bank.

Yes, the IDA will earn interest, and that does not count against the public benefit.

[Editor's Note: According to Internal Revenue Bulletin 1999-44, Rev. Rul.99–44, page 549, (1) interest earned by an Individual Development Account (IDA) project participant on funds deposited in the participant's personal account is currently includible in the participant’s gross income under section 61 of the Code; (2) a project participant may exclude, as a gift under section 102, parallel funds paid for a qualified expense of the project participant; and (3) a donor may deduct under section 170 a contribution to a qualified entity for the qualified entity’s IDA project, subject to the limitations of that section. For more information on personal funds vs. parallel funds, see the Bulletin at http://www.irs.gov/pub/irs-irbs/irb99-44.pdf]

For more information and transcripts to the January Teleconference go to: http://wiseupwomen.tamu.edu/teleconferences.php?date=2010-01-29