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Beneficial Changes to Tax-Advantaged ABLE Accounts
Recently, some splendid news arrived for individuals with disabilities. New tax legislation has introduced changes to Achieving a Better Life Experience (ABLE) accounts, which are state-run savings tools designed to be tax-efficient.
Notable Changes to ABLE Accounts
Let’s explore the four key changes that shall take effect for the 2026 tax year.
Contribution Limit Inflation Adjustments
Each year, one can contribute up to the annual per-donee gift tax exclusion to an ABLE account. This is adjusted for inflation annually. In 2025, the contribution limit is pegged at $19,000. Notably, the inflation adjustment for ABLE accounts uses 1996 as the reference date. Consequently, this results in a higher annual contribution limit than under current law.
Higher Contribution Limit for the Employed
In good news for employed individuals without contributions to certain retirement plans, they can contribute more to their ABLE accounts. This additional amount can go up to the lesser of the individual’s annual income or the poverty line for a one-person household from the prior year. For 2024, this poverty line stands at $15,060 for most places, $18,810 for Alaska, and $17,310 for Hawaii. Importantly, this provision, initially set to expire in 2025, is now permanent.
The Permanent Saver’s Credit
An ABLE account holder has been eligible for the nonrefundable Saver’s Credit since the 2018 tax year. This has now been made permanent beyond 2025. The credit is up to 50% of the first $2,100 contributed, with a maximum of $1,050. It depends on the contributor’s filing status and income.
Rollovers from Qualified Tuition Programs
Furthermore, there’s a lovely change regarding rollovers from qualifying tuition programs to ABLE accounts. This temporary provision is now, graciously, permanent. However, certain conditions apply: the rollover must occur within 60 days, and the beneficiary must be either the same person or a family member. The rolled-over amount must fit within the inflation-adjusted annual contribution limits.
For further reading about these changes, you may wish to visit Beneficial Changes To Tax-Advantaged ABLE Accounts For Individuals With Disabilities.
The above is a general guide, and you may want to seek specialist advice for your specific circumstances.
If you have contributions to make, or questions to ask, feel free to reach out to Proskauer Rose LLP, who are experienced in handling these matters.
