CARL WATTS & ASSOCIATES

June 25, 2018

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ABLE Accounts, the Saver's Tax Credit, and
People with Disabilities
More and more these days it feels like we are watching episodes from a 2018 IRS series entitled “The Tax Cuts and Jobs Act”. Like with any TV show, some episodes are more interesting, some are more dramatic, and some may be just plain ordinary. Joke aside, episode by episode more information reaches us regarding the IRS regulations necessary for the implementation of the new tax law.


Recent information reveals that the new law enables eligible individuals with disabilities to put more money into their ABLE accounts, qualify for the Saver's Credit in many cases and roll money from their 529 plans (also known as qualified tuition programs) into their ABLE accounts. Below you can find some details about all these.

Achieving a Better Life Experience
(ABLE) Accounts

These are tax-advantaged savings accounts for individuals with disabilities and their families. ABLE accounts were created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act.

The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed. Contributions to the account, which can be made by any person (the account beneficiary, family and friends), must be made using post- taxed dollars and will not be tax deductible for purposes of federal taxes, however some states may allow for state income tax deductions for contribution made to an ABLE account.

The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age.

If you meet this age criteria and are also receiving benefits already under SSI and/or SSDI, you are automatically eligible to establish an ABLE account. If you are not a recipient of SSI and/or SSDI, but still meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician.

You need not be under the age of 26 to be eligible for an ABLE account. You could be over the age of 26, but must have had an age of onset before the individual’s 26 birthday.


The total annual contributions by all participating individuals, including family and friends, for a single tax year is $15,000. The amount may be adjusted periodically to account for inflation.

Starting in 2018, if the beneficiary works, they can also contribute part or all of what they make to their ABLE account.

This additional contribution is limited to the poverty line amount 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. However, the designated beneficiary is not eligible to make this additional contribution if their employer contributes to a workplace retirement plan on their behalf.
The Retirement Savings Contributions Credit

Also known as the Saver’s Credit, this credit is a lesser known tax credit that the IRS makes available to low and moderate income taxpayers who make retirement contributions to an IRA, 401K, 403B, 457, or any other IRS recognized retirement account.

The saver’s credit can be claimed by any taxpayer who is:

  1. Age 18 or older;

  2. Not a full-time student; and

  3. Not claimed as a dependent on another person’s return.


The maximum credit is $1,000 for single filers or individuals and $2,000 for married couples.

Starting in 2018, ABLE account beneficiaries can qualify for the Saver’s Credit based on contributions they make to their ABLE accounts.

Depending on your income and filing status, you may claim this credit on your return for a percentage of the contributions you made to a qualified retirement plan.

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions of up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A).

Here are the 2018 figures for the Saver’s Credit:


* All other filers include single, married filing separately,
or qualifying widow(er).

The Saver’s Credit can be claimed on Form 8880, Credit for Qualified Retirement Savings Contributions, which will be revised later this year to reflect changes made by the new law. This credit can reduce the amount of tax a person owes or increase their refund.


In addition to changes made to the ABLE accounts and the Saver’s Credit in favor of eligible individuals with disabilities, some funds now may be rolled into an ABLE account from the designated beneficiary’s own 529 plan or from the 529 plan of certain family members.

A 529 plan is a college savings plan sponsored by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training, or for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school for a designated beneficiary, such as a child or grandchild.

With a typical 529 plan, earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board at an eligible education institution and tuition at elementary or secondary schools.

Contributions to a 529 plan, however, are not deductible.

As of 2018, the term “qualified higher education expense” includes up to $10,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

More details about all changes made to the 529 plans as of 2018 will certainly follow some time during the year.



We think you have more than enough reasons, particularly this year, to keep up with our newsletters and dedicate a little of your time to finding out all the pieces of information which may shape your next tax return.
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