10/6/2021
Achieving a Better Life Experience, or ABLE, accounts are tax-advantaged savings accounts for individuals with disabilities and their families. They help disabled people pay qualified disability-related expenses without affecting their eligibility for government assistance programs.
Here are some key things to know about ABLE accounts:
Annual contribution limit
The 2021 limit is $15,000.
Certain employed ABLE account beneficiaries can make an additional contribution up to the lesser of these amounts:
The designated beneficiary's compensation for the tax year.
The poverty line for a one-person household. ($12,880 in the continental U.S., $16,090 in Alaska, and $14,820 in Hawaii for 2021).
Saver's credit
ABLE account designated beneficiaries may be eligible to claim the saver's credit for a percentage of their contributions, which is a non-refundable credit available to people who meet three requirements:
They are at least 18 years old at the end of the tax year
They are not a dependent or a full-time student
They meet the income requirements
The beneficiary claims this credit on Form 8880, Credit for Qualified Retirement Savings Contributions.
Rollovers and transfers from section 529 plans
Families may roll over funds from a 529 plan to another family member's ABLE account.
The ABLE account must be for the same beneficiary as the 529 account or for a member of the same family as the 529 account holder. Rollovers from a section 529 plan count toward the annual contribution limit. Example, the $15,000 annual contribution limit would be met by parents contributing $10,000 to their child's ABLE account and rolling over $5,000 from a 529 plan to the same ABLE account.
Qualified disability expenses
States can offer ABLE accounts to help people who become disabled before age 26 or their families pay for disability-related expenses including housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services.
Contributions aren't deductible for federal tax purposes, but distributions, including earnings, are tax-free to the beneficiary as long as they are used to pay qualified disability expenses.
Resources: ABLE Accounts - Tax Benefit for People with Disabilities Publication 907, Tax Highlights for Persons with Disabilities Form 1099-QA, Distributions from ABLE Accounts Form 5498-QA, ABLE Account Contribution Information Instructions for Forms 1099-QA and 5498-QA