Unlocking New Opportunities: Key ABLE Account Updates for 2026

Recent tax legislation has ushered important, long-awaited changes to ABLE accounts—the tax-advantaged savings program for individuals with disabilities. These updates, effective in the 2026 tax year, make ABLE accounts more powerful, flexible, and accessible than ever. Below are the four key changes and what they mean for account holders and their families.

1. Inflation-Adjusted Contribution Limits

ABLE contributions had already been generous, but now the limits will grow even more because of a new inflation adjustment:

• The cap is tied to the annual per-donee gift tax exclusion, which is updated each year for inflation.

• For 2025, the limit is $19,000.

• Importantly, the ABLE limit’s inflation adjustment uses a different “base year” (1996) than many other tax provisions, which means ABLE account contributions will increase faster than some other inflation-linked caps.

What this means: More room for regular contributions, without relying solely on gifts.

2. Higher Contribution for Employed Beneficiaries (“ABLE to Work”)

One of the most impactful changes: employed individuals can now boost their savings even more:

• If an ABLE account holder is employed and does not contribute to certain retirement plans, they can contribute additional funds beyond the $19,000 limit.

• This extra amount is capped at the lesser of (a) their annual compensation or (b) the federal poverty level for a single-person household (based on the previous year).

• The 2024 poverty-level threshold is $15,060 for most of the U.S., with slightly higher figures for Alaska and Hawaii.

• Crucially, what was once a temporary provision is now permanent—no more automatic sunset after 2025.

Why it matters: This “work bonus” allows more productive people with disabilities to truly benefit from their earnings — letting them save for their future without risking their eligibility for public benefits.

3. Permanent Saver’s Credit for ABLE Contributions

The “Saver’s Credit” just got a big upgrade for ABLE account holders:

• Previously, contributions to ABLE accounts were eligible for this non-refundable credit only through 2025.

• Now, the credit is permanent starting in 2026.

• The credit rate remains high — up to 50% of the first portion of eligible contributions. But the threshold amount is increasing:

  • For tax years before 2026, the credit applied to the first $2,000 contributed (max credit = $1,000).

  • For 2026 and beyond, the eligible contribution base rises to $2,100, so the maximum credit becomes $1,050.

Bottom line: This makes saving via ABLE even more attractive to lower- and moderate-income earners.

4. Rollovers from 529 College Savings Plans Made Permanent

Another major win: rollovers from qualified tuition programs (529 plans) into ABLE accounts are now permanent:

• The rollover must happen within 60 days.

• The person rolling over must be either the same beneficiary as the ABLE account or a family member of that beneficiary.

• The total amount rolled in, combined with other contributions for the year, can’t exceed the annual ABLE contribution limit (which, as noted, is now inflation-adjusted).

Implication: Families that overfunded 529 plans (or changed educational plans) can now redirect those assets into ABLE accounts tax-free — bringing more flexibility to long-term savings strategies.

Why These Changes Are a Big Deal

• Long-Term Security: Making these provisions permanent removes a lot of uncertainty. Families and individuals can now rely on ABLE accounts as a stable, long-term planning tool.

• Increased Participation: More generous limits and tax incentives could encourage more eligible individuals to open (or contribute more to) ABLE accounts.

• Expanded Work Incentive: By allowing employed beneficiaries to contribute more (without giving up benefits), these changes support financial independence.

• Better Resource Alignment: Rollover flexibility means money saved for education doesn’t have to go to waste — it can instead support disability-related expenses in a tax-efficient way.

  
  

Things to Consider

• State ABLE Plans Vary: While these are federal changes, ABLE accounts are administered at the state level — so the details, investment options, and fees will differ depending on which state program you use.

• Qualified Expenses: Remember, to get the tax benefits, the withdrawals must be used for qualified disability expenses.

• Public Benefits Impact: Up to $100,000 in an ABLE account is disregarded for Supplemental Security Income (SSI) and Medicaid eligibility.

• Rollover Limits: If you’re rolling over from a 529 plan, make sure you don’t exceed the ABLE contribution limit when combining rollover + new contributions.

  
  

Final Thought

By locking in higher contribution limits, permanent tax credits, and better rollover rules, the 2026 changes make ABLE accounts much more powerful. For many individuals with disabilities (and the people who support them), this could be an opportunity to build financial resilience, preserve benefits, and plan for a more secure future.

If you're considering opening an ABLE account or maximizing one you already have, now is a great time to talk to a financial planner or tax advisor who understands the unique rules around these accounts.