IRS Increases Contribution Limit for ABLE Accounts

Starting in 2024, there's an opportunity for individuals with disabilities to increase their savings in ABLE accounts, special savings accounts that do not affect eligibility for government assistance. The Internal Revenue Service announced that the annual contribution cap has been raised to $18,000, an increase from the previous $17,000, reflecting adjustments due to inflation. Learn more about our special needs Certified Financial Planning^TM firm.

ABLE accounts, established by a 2014 law, allow people with disabilities to save up to $100,000 without losing eligibility for Social Security and other public benefits, with Medicaid eligibility unaffected by the total amount saved. These accounts can be used to cover qualifying disability-related expenses like education, health care, transport, and housing, and the interest generated is tax-free.

Typically, contributions to ABLE accounts mirror the federal gift tax exclusion limits, but those with disabilities who work and don't have a retirement plan can save additional income. In the 48 contiguous states, disabled workers can save an additional $14,580 this year, while those in Alaska and Hawaii can save up to $18,210 and $16,770 respectively, beyond the new maximum contribution limit.

There are currently ABLE account programs active in 47 states, available to any eligible individual, provided their disability began before the age of 26. However, a revision in the 2022 federal law will expand this age of onset to 46, starting in 2026.

As of the most recent count in September, over 158,000 ABLE accounts have been established nationwide, holding a cumulative total of $1.551 billion, as reported by ISS Market Intelligence.

If your ABLE account is aimed at boosting your financial security, it's crucial to assess whether you're overspending or underspending on priorities. A financial planner can analyze your account and others, such as a Special Needs Trust or retirement accounts, to craft a balanced spending plan. They'll also guide you on minimizing tax impacts and efficiently coordinating your assets.
‍
To ensure your child's financial and overall well-being, contact our special needs Certified Financial Planners^TM.