Two provisions in the Tax Reform Bill enhance savings options for those with ABLE accounts

Two provisions in the Tax Reform Bill enhance savings options for those with ABLE accounts

Group News posted in on 13 April 2018| comments
audience: The Boston Foundation | last updated: 13 April 2018

In 2014, Congress created 529 ABLE accounts via the passage of the Achieving a Better Life Experience (ABLE) Act. As a result of the new Tax Cuts and Jobs Act signed into law by President Trump on December 22, 2017, ABLE accounts now have greater flexibility when it comes to planning for those with special needs.

As we discussed in one of our previous posts, ABLE accounts allow individuals with disabilities or their families to set aside money in tax-advantaged savings accounts for disability-related expenses, while remaining eligible for means-tested government benefits such as Medicaid or Social Security benefits. Individuals who accumulate less than $100,000 in these accounts will not jeopardize any sort of government benefit, while Medicaid eligibility is not affected by any amount of funds in the account. However, total annual contributions for a single individual’s account may not exceed the annual gift tax exclusion ($15,000 in 2018).

A new provision in the tax bill (Section 11024), which has been sought by advocates since 2016, allows beneficiaries of ABLE accounts who earn income from employment to make additional contributions above the $15,000 annual cap—up to the lesser of the beneficiary’s compensation for the year or the federal poverty level, which is currently $12,060 for an individual. However, this applies only to individuals who do not participate in their employer’s retirement plan.

The other new provision (Section 11025) allows families who have accumulated funds in a 529 savings account benefiting a disabled individual’s education, to roll over to an ABLE account an amount not to exceed the overall contribution limit (currently $15,000 a year). Both accounts must have the same beneficiary or an immediate family member as the beneficiary (for example, moving assets from one child’s 529 account to another child’s ABLE account is now allowed).

With ever-increasing expenses needed to support those with special needs, these two new provisions offer the ability to further improve the lives of disabled individuals and their families, while reducing the constant stress and worry that so many of them experience.


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The Boston Foundation
75 Arlington Street 10th Floor
Boston, MA 02116
United States
Phone: 1 617-338-1700
Fax: 1 617-338-1605



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