[This is part of a Special Series on the tax changes made by the One Big Beautiful Bill Act, which was enacted in July 2025. It includes a wide range of changes to individual and corporate taxes, deductions, credits, forms and other topics, that affect tax filing starting this year into the future.]
With all the major changes included in the one Big Beautiful Bill Act (OBBBA), some other provisions have flown under the radar. For example, the new law enhances the favorable tax rules for so-called “ABLE accounts”—created by the Achieving a Better Life Experience Act (ABLE) Act—that may benefit differently abled / disabled individuals. The OBBBA changes come on top of another key expansion for certain families.
Background: An ABLE account works like the better-known Section 529 account for higher education expenses. After you establish the account and contribute to it, any earnings inside the account are exempt from current tax. (Contributions are not tax-deductible). When you withdraw amounts from the ABLE account, the payouts are tax-free if they are used to pay for qualified expenses.
For these purposes, “qualified expenses” include the following:
- Education;
- Housing;
- Transportation;
- Employment training and support;
- Assistive technology;
- Personal support services;
- Health care expenses; and
- Financial management and administrative services.
Only one ABLE account can be set up for a disabled individual. As with Section 529 accounts, various investment options are available to participants.
Initially, eligibility for an ABLE account was limited to individuals who are blind or have another significant disability with its onset beginning before age 26.
This restriction often shut out deserving people who could benefit from ABLE accounts. However, subsequent legislation adds another 20 years to the threshold—to age 46—beginning in 2026. This change is expected to be especially beneficial to individuals with mental health issues, other disabling illnesses, and veterans who become disabled after their mid-twenties.
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A disabled individual or anyone else may make contributions to the account. The annual limit for contributions has been raised to $19,000, the same as the annual gift tax exclusion. (The limit is indexed for inflation in $1,000 increments.) Similarly, the total limit on contributions that can be made to an ABLE account over time is subject to the applicable state limit for Section 529 accounts, with certain modifications. In many states, this overall limit exceeds $300,000.
What’s more, prior legislation permitted a rollover from a Section 529 account for a beneficiary to an ABLE account for a qualified disabled individual without any adverse tax consequences. This tax break was scheduled to expire after 2025.
Now Congress has enhanced the tax benefits of ABLE accounts by making the following provisions permanent.
- Under the “ABLE to Work” provision, qualified individuals with disabilities may contribute more than the annual gift tax exclusion, (up to the federal poverty level or their earnings for the year), if they don’t have access to an employer retirement plan like a 401(k).
- Certain low-to-moderate income individuals may qualify for the retirement saver’s credit for contributing to ABLE accounts, subject to future increase beginning in 2027.
- The ability to rollover unused funds in a Section 529 plan for one family can be rolled over to an ABLE account for another family member is preserved. It was scheduled to expire after 2025,
Bottom line: Families with a disabled individual may rely on professional guidance regarding ABLE accounts. Be well-versed in the law and ready, willing and ABLE to answer their questions.
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