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ABLE accounts help with disability-related expenses

Posted on August 4, 2022

If you or someone in your family is newly disabled, it’s important (and helpful) to know that the those with disabilities can use an IRS-approved Achieving a Better Life Experience or ABLE account to help pay qualified disability-related expenses.

ABLE accounts are tax-advantaged savings accounts that won’t negatively affect any eligibility for government assistance programs.

Here’s what to know:

  • 2022 annual ABLE contribution limit is $16,000.
  • Certain employed ABLE account beneficiaries may 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. For 2022, this amount is $12,880 in the continental U.S., $16,090 in Alaska and $14,820 in Hawaii.

Saver’s credit

ABLE account designated beneficiaries may be eligible to claim the saver’s credit for a percentage of their contributions. The saver’s credit is a non-refundable credit available to individuals who meet these three requirements:

What about 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. For example, the $16,000 annual contribution limit would be met by parents contributing $10,000 to their child’s ABLE account and rolling over $6,000 from a 529 plan to the same ABLE account.

Qualified disability expenses include:

  • States can offer ABLE accounts to help people who become disabled before age 26 or their families pay for disability-related expenses. These expenses include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services.
  • Though contributions aren’t deductible for federal tax purposes, distributions, including earnings, are tax-free to the beneficiary, if they are used to pay qualified disability expenses.

If you have a question about setting up an ABLE account, the CPAs at Teipen CPA Group can help. Or check out more info at IRS.gov
ABLE Accounts – Tax Benefit for People with Disabilities
Publication 907, Tax Highlights for Persons with Disabilities