Tax Cuts and Jobs Act of 2017
The Tax Cuts and Jobs Act of 2017 was the most extensive change to the tax code in many years. It has an impact on nearly everyone. The act included changes that effect ABLE accounts. Below is a summary of the changes that effect ABLE accounts.
Under the category of Personal Credits
The Saver’s Credit was modified. The designated beneficiary of an ABLE account may claim the saver’s credit for contributions made to his or her ABLE account. This change affects the designated beneficiaries of ABLE accounts. This change is effective for 2018 – 2025.
Under the category of Education Provisions
Rollovers from 529 plans to ABLE accounts allowed.
- Amounts from a 529 plan can be rolled over to an ABLE account penalty-free if the ABLE account is owned by the designated beneficiary of the 529 account or a member of the designated beneficiary’s family
- Rolled-over amounts count towards the ABLE contribution limitation for the year
- Excess rollover amounts are includible in the distributee’s gross income
This change affects taxpayers who are totally and permanently disabled and qualify for an ABLE account. The law applies to distributions after December 22, 2017 and does not apply to distributions after December 31, 2025.
Increased contribution to ABLE accounts allowed.
- The per-donee limit on contributions equals the annual gift tax exclusion amount ($15,000 for 2018)
- The above limit is increased by an ABLE beneficiary’s contribution up to the lesser of the federal poverty line for a one-person household or the individual’s compensation for the year
- ABLE beneficiaries making contributions should keep records that support the tax treatment
This change affects taxpayers who are totally and permanently disabled and qualified for an ABLE account. This part of the law is effective December 22, 2017 with the modification repealed beginning in 2026.
Shelly Lamberth, Enrolled Agent|Tax Advisor|Block Advisors
National Tax Practice Institute – Fellow
9037 Research Blvd, Ste 500, Austin, TX 78758
Office: 512.836.0597 | Fax: 512.836.0916