The Internal Revenue Service has increased the gift tax exemption due to inflation. The annual contribution limit for ABLE accounts is tied to that number. (Molly Riley/McClatchyDC/TNS)
People with disabilities can save more money without jeopardizing their eligibility for government benefits thanks to changes in tax rules for the new year.
Starting this month, the federal gift tax deduction will increase from $16,000 to $17,000 annually, according to the Internal Revenue Service. Savings limits for ABLE accounts, a savings vehicle for persons with disabilities, are similarly increased as they are tied to that metric.
This increase is a result of inflation and follows a similar increase in maximum allowed contributions to ABLE accounts last year.
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Created under federal law of 2014, ABLE accounts allow people with disabilities to accumulate up to $100,000 without losing eligibility for Social Security or other government benefits. You can keep Medicaid regardless of your account balance.
Funds deposited in the special account can be used to pay eligible disability expenses such as education, medical care, transportation and housing. The interest earned is tax-free.
Annual deposits in ABLE accounts are generally capped at the IRS gift tax deduction. However, an employed person with a disability can save a portion of their income, in addition to the $17,000 gift tax.
Residents of Alaska can get an additional $16,990 and Hawaii residents of $15,630 in compensation, according to the Autism Society, while disabled workers in neighboring 48 states will receive a gift tax exemption this year. Save $13,590 more than your deductible.
ABLE accounts are offered through programs in 47 states, many of which are open to individuals nationwide if they develop a disability before age 26. From 2026, that age limit will be raised to 46 under recently passed legislation.
According to ISS Market Intelligence, more than 131,000 ABLE accounts have been opened as of September, with assets reaching $1.133 billion.
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