Written by: Nancy Schoenberg, Senior Trust Administrator
The One Big Beautiful Bill Act (P.L. 119-21), signed into law on July 4, 2025, includes three provisions that enhance and make permanent use of tax advantaged Achieving a Better Life Experience (ABLE) Accounts for people with disabilities. These tax-advantaged accounts are designed to help eligible individuals with disabilities save and invest money without jeopardizing their eligibility for benefits such as Medicaid and SSI. These accounts make it possible to set aside funds for care, housing, education, and more without risking crucial support. The changes below primarily make permanent rules that have been in place since the Tax Cut and Jobs Act of 2017 and were set to expire on December 31, 2025.
- ABLE to Work Rule: The law makes permanent the current increased contribution limits for ABLE accounts. The annual contribution limit is based on the current gift tax exclusion amount, which is $19,000 in 2025. For individuals with a disability who are employed there is an increased contribution beyond the gift tax exclusion amount up to the federal poverty level or their earnings for the year, whichever is less and if they are not contributing to a defined contribution retirement plan. This provision also extends an additional year of inflation adjustment for the limit base amount, effective for contributions made after December 31, 2025.
- Saver’s Tax Credit: The law allows eligible beneficiaries who make qualified contributions to their ABLE account to permanently qualify for a Saver’s Credit. The Saver’s Credit is a tax credit on contributions deposited and saved in an ABLE account, provided the individual with disabilities meets the income and eligibility requirements. Beginning in tax year 2027, the annual contribution eligible for the Saver’s Credit will increase from $2,000 to $2,100, with a maximum tax credit of $1,050 as determined by the adjusted gross income of the eligible individual.
- 529 Rollovers: The legislation permanently allows assets from a 529 education savings account to rollover to an ABLE account of the 529 account’s designated beneficiary or their family member. These rollovers are not subject to income taxation, provided the amounts do not exceed the ABLE annual contribution limit.
Under separate legislation, the ABLE Age Adjustment Act of 2022, will make more people become eligible for ABLE accounts effective January 1, 2026. People whose disability was diagnosed before age 46 will be eligible for the accounts, which is up from the current age of 26, allowing millions more people to qualify for an ABLE account.
These positive changes give families and individuals with disabilities new tools to save and prepare for their future.
If you have any questions, please contact our Prairie Trust team today!