What To Know About ABLE Accounts
Achieving a Better Life Experience accounts are specialized savings accounts designed to help individuals pay for qualified disability-related expenses.
These accounts allow eligible individuals to save without jeopardizing their eligibility for certain government assistance programs.
Understand the 2025 ABLE Account Contribution Limits
For the year 2025, the annual contribution limit for ABLE accounts is set at $19,000. In addition to this standard limit, employed individuals who are designated beneficiaries of an ABLE account may qualify to contribute more
The additional contribution limit is $15,650 for residents of the continental United States, $17,990 for residents of Hawaii and $19,550 for those living in Alaska.
Explore eligibility for the Saver's Credit
Designated beneficiaries of ABLE accounts may also be eligible to claim the Saver’s Credit. This is a nonrefundable federal tax credit that applies to a portion of eligible contributions. To qualify, individuals must meet specific requirements.
They must be at least 18 years old by the end of the tax year, must not be claimed as a dependent on another person’s tax return and must not be enrolled as a full-time student. Eligible individuals can claim the credit by filing Form 8880, Credit for Qualified Retirement Savings Contributions.
Know the rules for 529 plan rollovers into ABLE accounts
Families can transfer funds from a 529 college savings plan into an ABLE account under certain conditions. The ABLE account must belong to either the same individual as the original 529 account or to another qualifying family member.
However, the total amount transferred from the 529 plan combined with any additional contributions made to the ABLE account during the year must not exceed the annual contribution limit.
For example, under the 2024 contribution limit of $18,000, a family could contribute $10,000 directly to an ABLE account and roll over $8,000 from a 529 plan into the same account. This would reach the full annual contribution cap.
Review who qualifies to open an ABLE account
States offer ABLE accounts to individuals who became disabled before the age of 26. These accounts can also be used by families to cover qualified expenses related to a beneficiary’s disability. Eligible expenses are defined in detail in IRS Publication 907, Tax Highlights for Persons with Disabilities.
Understand the tax advantages of ABLE account distributions
Although contributions to ABLE accounts are not deductible for federal tax purposes, qualified distributions offer significant tax benefits.
When funds are used to pay for eligible disability-related expenses, any earnings and withdrawals are excluded from taxable income. This makes ABLE accounts a valuable tool for managing long-term financial needs while maintaining access to important public assistance programs.
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