Recently signed tax legislation includes several beneficial changes to Achieving a Better Life Experience (ABLE) accounts, a potentially useful and tax-efficient savings tool available...

Recently signed tax legislation includes several beneficial changes to Achieving a Better Life Experience (ABLE) accounts, a potentially useful and tax-efficient savings tool available through state-run programs for individuals with disabilities. We previously posted an overview of ABLE accounts. Below is a summary of four beneficial changes to ABLE accounts, which will become effective for the 2026 tax year:

1. Contribution Limit Inflation Adjustments: Each year an amount up to the annual per-donee gift tax exclusion may be contributed to an ABLE account, which is adjusted annually for inflation. The 2025 limit is $19,000. As a general rule, the gift tax exclusion is adjusted for inflation beginning in 1997 when the limit was $10,000, but for ABLE accounts the inflation adjustment uses a reference date of 1996, so the annual contribution limit is higher than what it would otherwise be under present law.

• Higher Contribution Limit: Employed individuals who do not have contributions made to certain qualified retirement plans may contribute an additional amount to their ABLE accounts up to the lesser of the individual's compensation for the tax year or the poverty line for a one-person household determined for the calendar year before the contribution year. The 2024 poverty line is $15,060...

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