Most states offer programs that allow you to establish a tax-favored account to cover the qualified expenses of a family member with a disability. These programs were authorized under the Achieving a Better Life Experience (ABLE) Act of 2014, and the One Big Beautiful Bill Act (OBBBA) sweetens the deal.
An ABLE account must be set up under a qualified ABLE program that’s established and maintained by a state, state agency or instrumentality that meets tax-law requirements that are similar to the requirements for Section 529 plans. You can establish an ABLE account under any state’s program, regardless of where the beneficiary lives. The designated beneficiary of an ABLE account is defined as an eligible individual who’s deemed to be the account owner. An eligible individual can have only one ABLE account established on his or her behalf.
An individual is eligible for a tax year if:
- A disability certification for the individual has been filed with the IRS for the year, or
- The individual is entitled to benefits for the year based on blindness or disability under the Social Security disability insurance program or the Supplemental Security Income program, and that blindness or disability occurred before the individual is age 26.
Important: Under a provision in SECURE 2.0, the age before which blindness or disability must have occurred for ABLE account eligibility will increase to 46 starting in 2026.
Each year, you can contribute to an ABLE account up to the amount of the federal gift tax annual exclusion ($19,000 for 2025). Under the Tax Cuts and Jobs Act, after the general annual contribution limit is reached, an ABLE account beneficiary can potentially contribute an additional amount. The additional contribution is based on the applicable federal poverty line for a one-person household or the beneficiary’s compensation for the contribution year. The ability to make additional contributions was scheduled to expire at the end of 2025, but the OBBBA makes it permanent.
The new law also makes permanent the inclusion of ABLE account contributions as eligible contributions for purposes of the saver’s credit. Starting in 2027, only ABLE account contributions will be eligible saver’s credit contributions. Before 2027, certain retirement account contributions also count as eligible saver’s credit contributions. Under the OBBBA, the maximum saver’s credit increases from $2,000 to $2,100 after 2026.
