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Tax Reform for ABLE accounts, Saver’s Credit, and 529 rollovers

August 30, 2018

 

The Tax Cuts and Jobs Act made several changes to ABLE accounts. ABLE accounts are authorized tax-advantaged accounts to help disabled people pay for qualified disability-related expenses.

 

Here are changes that will affect people who have an ABLE account:

 

Annual Contribution limit increase

 

  • The limit for 2018 is $15,000

  • Certain employed ABLE account beneficiaries may make an additional contribution up to the lesser of the following:
     *The designated beneficiary’s compensation for the tax year
     * The poverty line for a one-person household. For 2018, this amount is $12,140 in the continental U.S., $13,960 in Hawaii and $15,180 in Alaska 

 

Saver’s Credit

 

  • ABLE designated beneficiaries may now be eligible to claim the Saver's Credit for a percentage of their contributions.

  • The credit is claimed on Form 8880, Credit for Qualified Retirement Savings Contributions. The Saver’s Credit is a non-refundable credit available to individuals who meet these three requirements:
     * Are at least 18 years old at the close of the taxable year
     * Are not a dependent or a full-time student
     * Meet the income requirements

 

Rollovers and transfers from section 529 plans

 

  • Families may now roll over funds from a 529 plan to another family member’s ABLE account.