As we wrote about in December 2014 the Achieving Better Life Experience (“ABLE”) was signed into law to provide a means for saving and paying for disability-related expenses.  While ABLE contributions are not tax deductible distributions are tax-free to the designated beneficiary if used to pay for qualified disability expenses.  Examples include:

  • housing
  • health, prevention and wellness
  • education
  • employment training
  • transportation
  • assistive technology

The first proposed regulations came in 2015 after the ABLE Act was enacted.  The second set of proposed regulations was published in 2019 after the Tax Cuts and Jobs Act made several major changes to ABLE accounts.  Last week the IRS published final regulations that include guidance on the gift and generation-skipping tax consequences of ABLE account contributions as well as the income, gift and estate tax consequences of distributions.

In addition:

  • Individuals may now put more money into their ABLE accounts.
  • Before January 1, 2026, funds can be rolled over from a designated beneficiary’s qualified tuition program (e.g. 529 plan) into his/her ABLE account.
  • Some contributions to ABLE accounts by those with low or moderate incomes can qualify for the Saver’s Credit.