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Publication 907

ABLE Account(p6)



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

Who can establish an ABLE account and what are the requirements?(p6)

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.
If you’re unable to establish an ABLE account, your agent, under a power of attorney, or if none, your parent or legal guardian can establish it for you. But only you, the designated beneficiary, can have any interest in the account during your lifetime.

Loss of eligible individual status.(p7)

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.
In 2016, Adam is an eligible individual with $2,400 in his ABLE account. $2,000 of this is from contributions, and $400 is earnings. During 2016, Adam’s disability goes into remission and he is no longer an eligible individual. In 2017, a distribution of $2,400 is made to Adam from the ABLE account while he is still not an eligible individual. The earnings portion, $400, is included in Adam’s gross income after the calculation in Table 1.

Contribution limitation.(p7)

The total annual contributions to an ABLE account (other than amounts received in rollovers and/or program-to-program transfers) are limited to the annual gift tax exclusion amount ($14,000 for 2016). 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 more than the annual gift tax exclusion amount is contributed to your ABLE account?(p7)
If more than the annual gift tax exclusion amount is contributed to your ABLE account, the ABLE program must return to the contributors the excess contributions (amounts over the gift-tax exclusion amount) and the earnings on those contributions. The ABLE program should do this on or before the due date of your income tax return, which is generally April 15 (including extensions), and must notify you of this action.
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 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?(p7)
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 of your income tax return, which is generally April 15 (including extensions).


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
The year's total distributions for qualified disability expensesxEarnings portion of the year's distributions =Amount nontaxable for the year
The year's total distributions
Example. (p7)
On August 2, 2017, Dora's ABLE account has a balance of $2,400; $2,000 is from contributions and $400 is earnings. During 2017, Dora has qualified disability expenses of $1,600, but she receives distributions from her ABLE account totaling $2,400 on August 2, 2017. She figures the nontaxable part of her earnings portion as follows.
Distributions for qualified disability expenses: $1,600xEarnings portion of the year's distributions: $400=$266.67, the nontaxable portion of the earnings
Total distributions: $2,400
Dora will include the difference of $133.33 ($400 – $266.67) in her gross income for 2017.
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.(p7)

If you need to move your ABLE account to another qualified ABLE program because of a change in residency or 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.
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.
Program-to-program transfer.(p8)
The entire balance of your ABLE account can be transferred by your ABLE program to another ABLE program if, for example, you move from one state to another. 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. (p8)
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. A sibling, whether by blood or by adoption, includes a brother, sister, stepbrother, stepsister, half-brother, and half-sister.

New information returns for ABLE accounts.(p8)

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. (p8)
An ABLE program issues this form to you to report all distributions made from your ABLE account.
Form 5498-QA, ABLE Account Contribution Information. (p8)
An ABLE program issues this form to you annually to report contributions (including rollovers), fair market value 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.