Did you know that there’s a tax-free option to pay for costs of someone with disabilities that’s comparable to saving for college costs by using a Section 529 program? Achieving a Better Life Experience (ABLE) accounts can assist in funding eligible disability expenses for a beneficiary. The SECURE 2.0 Act, signed into law in 2022, brought modifications that will enable more people to qualify to be eligible for ABLE accounts from the beginning of 2026 . The One Big Beautiful Bill Act (OBBBA) which was signed into law on the 4th of July, 2025 has made some improvements to them indefinitely.
The Advantages
ABLE accounts can be set up by those who qualify to provide for their own needs, by relatives to provide for their dependents or guardians to benefit the people for whom they’re responsible. Anybody can make a contribution to the ABLE account.
The OBBBA will continue to allow ABLE account holders to take advantage of their Saver’s Credit for eligible contributions made to their personal ABLE accounts. For the tax years 2025 through 2026 the highest amount of Saver’s credit a qualified beneficiary can get is $1,000 per person subject to the applicable limit on income and contribution requirements.
While contributions aren’t tax deductible, the funds in the account are growing in a tax-deferred manner. Distributions made to pay for eligible expenses are tax-free. If the distributions are for expenses that are not qualified, the amount is taxed in the same way as income and is subject to a penalty of 10%.
The existence of an ABLE account isn’t likely to impact the beneficiary’s eligibility to the benefits provided by the government to which he is entitled. ABLE accounts do not have an impact upon Social Security Disability Insurance (SSDI) payments or Medicaid eligibility.
But, ABLE Account balances that exceed $100,000 will count towards that Supplemental Security Income (SSI) program’s limit of $2,000 for resources. In the end, the user’s SSI benefits are suspended, but not terminated if the ABLE account balance is more than $102,000, provided there are no other measurable assets. In addition, any distributions made from an ABLE account that is used to cover housing costs are deemed income for SSI purposes and can decrease the amount of an individual’s SSI benefit.
Expanded Eligibility
Individuals who qualify have to be blind or disabled. In 2025 and previous years, the person must have been disabled prior to turning 26 years old. However, under SECURE 2.0 the age will increase to 46 starting from January 1, 2026.
To be eligible, people typically must be eligible for entitlements under SSI as well as SSDI programs. Additionally, individuals may become eligible for benefits if a disability certificate is submitted to the IRS.
Qualified Expenses
In addition, the distributions of accounts such as an ABLE account can be tax-free when they are used to pay for expenses to maintain or enhance the health of the beneficiary, independence or improve the living conditions. These include:
- Education
- Housing
- Transportation
- Wellness and health
- Assistive technology
- Personal Support services
Employment support expenses are also eligible.
The Process of Setting up an Account
Like 529 plans, ABLE accounts are set up through state-sponsored plans and provide many choices. An ABLE account can be created by a state-sponsored program different from the one where the person lives, as states are permitted to accept out-of-state participants. The money from an ABLE account is able to be used to invest into a variety of investment options. Furthermore, the investment allocations of the account may be adjusted two times a year.
Be aware that a person who is eligible could have only one ABLE account. In addition, there is a maximum annual contribution amount of $19,000 in 2025, and $20,000 in 2026. Contributions from a 529 plan could be transferred to the ABLE account without penalty or tax, as long as there is a valid reason for the transfer. ABLE account’s beneficiary is the identical as or a family member of the 529 plan beneficiary. The rollover contributions count towards your limit of the annual ABLE contributions limit.
If the beneficiary is employed, they could be able to contribute a portion or the entire earnings to an ABLE account over the regular annual limit, if they don’t participate in a retirement plan that is sponsored by the employer. The additional contribution is limited by the poverty limit for a one-person household.
A New Opportunity
If you or a loved one in your family were blind or disabled after the age of 26 but prior to age 46, the expansion in ABLE account eligibility starting in 2026 will give you a chance to accumulate and save money with a tax advantaged basis. To find out more about the tax advantages as well as other planning financial options, consider getting in touch with Parr & Ibarra CPA firm in Keller, TX today.
