ABLE Accounts: Contributions, Distributions, and Tax Reporting: Tax Benefits for People With Disabilities (2025 IRS Guide)

This guide covers “ABLE Accounts: Contributions, Distributions, and Tax Reporting” within tax benefits for people with disabilities. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 907 (2025), Tax Highlights for Persons With Disabilities, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

ABLE Accounts: Contributions, Distributions, and Tax Reporting

Overview.

Compare ABLE programs on the websites of state governments to see which program is best suited for you.

• An ABLE account is a tax-favored savings account that can accept contributions for an eligible individual with a disability or who is blind, and who is the designated beneficiary and owner of the account. The account is used to provide for qualified disability expenses.

• An ABLE account is generally disregarded for purposes of determining eligibility for benefits under Supplemental Security Income (SSI) and certain other means-tested federal programs. For further information, go to SSA.gov.

• A designated beneficiary is limited to only one ABLE account at a time (for exceptions, see Rollovers, program-to-program transfers, and beneficiary changes, later). If an additional ABLE account is opened (other than for receiving a rollover or program-to-program transfer), it is still an ABLE account if either all contributions made to the additional account are returned to the contributors or the additional account is transferred into your preexisting ABLE account with any excess contributions and excess aggregate contributions being returned to the contributors, on or before the due date (including extensions) of your federal income tax return for the year in which the additional account was established.

• Earnings in an ABLE account aren't taxed unless a distribution exceeds a designated beneficiary’s qualified disability expenses. A designated beneficiary doesn't include distributions for qualified disability expenses in their income. Qualified disability expenses include any expenses incurred at a time when the designated beneficiary is an eligible individual. The expenses must relate to blindness or disability, including expenses for maintaining or improving health, independence, or quality of life.

• Contributions to an ABLE account are not tax deductible and must be in cash or cash equivalents. Anyone, including the designated beneficiary, can contribute to an ABLE account. An ABLE account is subject to an annual contribution limit and a cumulative balance limit.

• Upon your death, as a designated beneficiary, any state may file a claim (either with the person with signature authority over your ABLE account or the executor of your estate) for the amount of the total medical assistance paid to you under the state's Medicaid plan after you (or a person with authority to open an ABLE account on your behalf) established an ABLE account. The amount paid in satisfaction of such a claim is not a taxable distribution from your ABLE account. Further, this amount is paid to the state only after all your qualified disability expenses have been paid from your ABLE account and the amount paid to satisfy the state's claim is reduced by the amount of all premiums you paid to a Medicaid Buy-In program under that state's Medicaid plan.

Who can establish an ABLE account and what are the requirements?

You may establish an ABLE account if your blindness or disability occurred before age 26. As a disabled individual, you may be eligible if either of the following applies.

• You are entitled to benefits based on blindness or disability under title II or XVI of the Social Security Act.

• You file a disability certification under the rules of your qualified ABLE program, which will include information regarding your diagnosis relating to your relevant impairment or impairments signed by a physician (as defined in section 1861(r) of the Social Security Act). You must certify one of the following.
  ▶ You have a medically determinable physical or mental impairment which results in marked and severe functional limitations, which (a) can be expected to result in death, or (b) lasted or can be expected to last for a continuous period of not less than 12 months.
  ▶ You are blind within the meaning of section 1614(a)(2) of the Social Security Act.

You may choose to have someone else establish an ABLE account for you. If you’re unable to establish an ABLE account, your agent, under a power of attorney, or if none, your conservator or legal guardian, spouse, parent, sibling, grandparent, or a representative payee appointed for you by the Social Security Administration (SSA), in that order, can establish it for you. However, only you, the designated beneficiary, can have any interest in the account during your lifetime.

Loss of eligible individual status.

If you establish an ABLE account and later cease to be an eligible individual because, for example, your impairment goes into remission, then beginning the first day of the next year no contributions may be accepted by your ABLE account. If you cease to be an eligible individual, then for each tax year in which you are not an eligible individual, the account will continue to be an ABLE account, and the ABLE account will not be deemed to be distributed. Contributions may resume after the impairment recurs. You should notify your ABLE program of any changes in your eligibility status.

Distributions from your ABLE account during a period you’re no longer an eligible individual aren’t for qualified disability expenses and therefore are possibly subject to tax. The earnings portion of a distribution (determined under section 72) made from your ABLE account to you when you’re no longer an eligible individual may be taxable.

Example.

In 2025, the taxpayer is an eligible individual with $2,400 in their ABLE account. $2,000 of this is from contributions, and $400 is earnings. During 2025, the taxpayer’s disability goes into remission and they are no longer an eligible individual. In 2026, a distribution of $2,400 is made to the taxpayer from the ABLE account while they aren’t an eligible individual. The earnings portion, $400, is included in the taxpayer’s gross income after the calculation in Table 1. Figuring the Taxable Portion of a Distribution.

Contribution limitation.

The total annual contributions to an ABLE account (including amounts rolled over from a section 529 account, but not other amounts received in rollovers and/or program-to-program transfers between ABLE accounts) are limited to the annual gift tax exclusion amount ($19,000 for 2025), plus certain employed ABLE account beneficiaries may make an additional contribution up to the lesser of these amounts: (1) the designated beneficiary’s compensation for the tax year, or (2) the poverty line amount of $15,650 in the continental United States, $17,990 in Hawaii and $19,550 in Alaska. The designated beneficiary’s contribution limit is determined using the poverty guideline applicable in the state of the designated beneficiary’s residence. An employed designated beneficiary isn’t eligible for the increased contribution limit for the tax year if any contribution is made on behalf of the employee to a qualified defined contribution plan (within the meaning of section 414(i)), a section 403(b) plan, or a section 457(b) plan. Also, contributions may not exceed an annual cumulative limit, which is the same as the state’s section 529 qualified tuition program limit.

What if amounts contributed to your ABLE account are greater than the annual contribution limit?

If amounts contributed to your ABLE account are greater than the annual contribution limit, the excess contributions and the earnings on those contributions must be returned to the contributors. The ABLE program should do this on or before the due date (including any extensions) of your income tax return and must notify you of this action. The due date of your income tax return is generally April 15. However, it is your responsibility or the responsibility of the person acting on your behalf to ensure that certain contributions of your compensation income are not greater than the limit and to request the return of any excess contributions by the ABLE program.

You're subject to a 6% excise tax on the excess contributions and earnings that aren't returned by the ABLE program to the contributors by the due date (including any extensions) of your income tax return. You figure this tax on Form 5329, Part VIII, and file it even if you're not otherwise required to file a federal income tax return.

What if your ABLE account exceeds the cumulative limit?

The cumulative limit for an ABLE account is set by each state’s ABLE program. If your ABLE account exceeds the cumulative limit, the state’s ABLE program will return to the contributors the contributions that caused your account to go over the limit, and notify you of this action by the due date (including any extensions) of your income tax return. The due date of your income tax return is generally April 15.

Distributions.

You can take distributions from your ABLE account to pay for any qualified disability expenses, such as expenses for maintaining or improving your health, independence, or quality of life. Qualified disability expenses include those for education, housing, transportation, employment training and support, assistive technology, personal support services, health, prevention and wellness, financial management, administrative services, legal fees, expenses for oversight and monitoring, and funeral and burial expenses.

If distributions from your ABLE account during a year aren't more than your qualified disability expenses for that year, no amount is taxable for that year. If the total amount distributed during a year is more than your qualified disability expenses for that year, the earnings portion of the distribution is included in your income for that year, after the calculation in Table 1.

Table 1. Figuring the Taxable Portion of a Distribution

Example.

On August 2, 2025, the taxpayer’s ABLE account has a balance of $2,400; $2,000 is from contributions and $400 is earnings. During 2025, the taxpayer has qualified disability expenses of $1,600, but they receive distributions from their ABLE account totaling $2,400 on August 2, 2025. They figure the nontaxable part of their earnings portion as follows.

The taxpayer will include the difference of $133.33 ($400 – $266.67) in their gross income for 2025.

The tax on any distribution included in your taxable income is increased by 10%. Figure this tax on Form 5329, Part II, and file it even if you're not otherwise required to file a federal income tax return.

Rollovers, program-to-program transfers, and beneficiary changes.

If you need to move your ABLE account to another qualified ABLE program to change the designated beneficiary of the account, you can accomplish this through a rollover. If the ABLE program permits, funds can move from one ABLE account to another through a direct program-to-program transfer.

Rollover.

You don't include in your gross income any amount distributed to you from your ABLE account if it's rolled over within 60 days to another ABLE account established for you or for an eligible family member and no other rollover has been made within the previous 12 months. Eligible family member means a sibling only, whether by blood or by adoption, and includes a brother, sister, stepbrother, stepsister, half brother, and half sister.

Program-to-program transfer.

The entire balance of your ABLE account can be transferred by your ABLE program to another ABLE program. You can also have your ABLE program transfer all or part of the balance in your account to an eligible family member. If the entire balance is transferred, your first ABLE account is closed after the transfer is complete. A program-to-program transfer isn’t a distribution so you don’t include any of the transferred amount in your gross income.

Change of designated beneficiary.

Your ABLE program may permit you to change the beneficiary of your ABLE account from yourself to one of your siblings if your sibling is an eligible individual for the tax year in which you make the change.

Rollover from section 529 tuition account to section 529A ABLE account.

Rollovers may be made without penalty from a section 529 tuition account to a section 529A ABLE account if the beneficiary of the ABLE account is the designated beneficiary of the tuition account or is an eligible member of the family. See Notice 2018-58. The limit on annual contributions to an ABLE account, discussed earlier in Contribution limitation, applies to these rollovers.

Information returns for ABLE accounts.

You may receive from your ABLE program the following forms which you can use if you need to file an income tax return.

Form 1099-QA, Distributions From ABLE Accounts.

An ABLE program issues this form to you to report all distributions made from your ABLE account.

Form 5498-QA, ABLE Account Contribution Information.

An ABLE program issues this form to you annually to report contributions (including rollovers), FMV of the account, opening of a new account, certification of a qualified account, and your disability code.

If you have any questions about the amounts on these forms, you should contact your ABLE program administrator.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 907 (2025), Tax Highlights for Persons With Disabilities: ABLE Account — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.