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IRS Tax Tips March 20, 2025
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Issue Number: Tax Tip 2025-19
*ABLE savings accounts and other tax benefits for persons with disabilities*
People with disabilities and their families can use Achieving a Better Life Experience accounts [ [link removed] ] to help pay for qualified disability-related expenses. ABLE accounts are savings accounts that don't affect eligibility for government assistance programs. Here are some key things people should know about these accounts.
*Contribution limit
*The contribution limit for 2025 is $19,000. Certain employed ABLE account beneficiaries may make an additional contribution. The additional amount is the designated beneficiary's compensation for the tax year or, for 2025, the amount of $15,650 for residents in the continental U.S., $19,550 in Alaska and $17,990 in Hawaii.
*Saver's Credit
*ABLE account designated beneficiaries may be eligible to claim the Saver's Credit [ [link removed] ] for a percentage of their contributions. This is a non-refundable credit for people who:
* Are at least 18 years old at the close of the taxable year,
* Are not a dependent or a full-time student, and
* Meet the income requirements.
The beneficiary can claim this credit using Form 8880, Credit for Qualified Retirement Savings Contributions [ [link removed] ].
*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 do count toward the annual contribution limit.
Rollovers from a 529 to an ABLE account, plus the annual contribution to the ABLE account, cannot exceed the maximum contribution amount for the year. For example, the $18,000 annual contribution limit for 2024 would be met by parents contributing $10,000 to their child's ABLE account and rolling over $8,000 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 if their families pay for disability-related expenses outlined in Publication 907, Tax Highlights for Persons with Disabilities [ [link removed] ]. Though contributions aren't deductible for federal tax purposes, distributions – including earnings – are tax-free to the beneficiary if the taxpayer pays for a qualified disability expense.
*More information*
* Form 1099-QA, Distributions from ABLE Accounts [ [link removed] ]
* Form 5498-QA, ABLE Account Contribution Information [ [link removed] ]
* Instructions for Forms 1099-QA and 5498-QA [ [link removed] ]
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