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People with disabilities can save more money without jeopardizing eligibility for government benefits thanks to a change in tax rules for the new year.
Starting January, the federal gift tax exclusion increases from $16,000 to $17,000 annually, according to the Internal Revenue Service. The deposit limit for ABLE accounts — a savings vehicle for people with disabilities — is tied to that metric, so it will grow as well. The rise is the result of inflation and follows a similar uptick in the maximum allowable ABLE account contribution last year.
ABLE Accounts allow people with disabilities to save up to $100,000 without forgoing eligibility for Social Security and other government benefits. Medicaid can be retained no matter how much is in the accounts. Funds saved in the special accounts can be used to pay for qualified disability expenses including education, health care, transportation and housing. Interest earned is tax-free. Annual ABLE account deposits are generally capped at the value of the IRS’ gift tax exclusion. But, people with disabilities who are employed can save some of their earnings in addition to the gift tax amount of $17,000.
ABLE accounts are offered through programs in 47 states, many of which are open to individuals nationwide if they have a disability that onset before age 26. Starting in 2026, that age limit will rise to 46 under a recently passed law.