IRS Issues Final Regs for ABLE Accounts

  

October 1, 2020
Jessica L. Jeane
Director of Public Policy and Communications

Treasury and the IRS, on the evening of October 1, 2020, issued final regulations for Achieving a Better Life Experience (ABLE) Accounts.

ABLE Accounts

ABLE accounts, enacted in 2014 under the ABLE Act (P.L. 113-295), serve to assist individuals with disabilities and their families in saving and paying for disability-related expenses. Although contributions are not deductible, distributions and earnings are tax-free for the designated beneficiary if used to pay qualified disability expenses.

The final regulations, T.D. 9923, finalize two sets of proposed rules, the first, published in 2015, and the second, which was published in 2019 following the enactment of the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97). The TCJA made several enhancements to ABLE accounts. 

“Eligible individuals may now put more money into their ABLE account and roll money from their qualified tuition programs (529 plans) into their ABLE accounts. Also, certain contributions made to ABLE accounts by low- and moderate-income workers may now qualify for the Saver's Credit,” the IRS said in IR-2020-227.

Generally, the final regulations provide guidance on the following:

  • the gift and generation-skipping transfer tax consequences of contributions to an ABLE account;
  • the federal income, gift, and estate tax consequences of distributions from, and changes in the designated beneficiary of, an ABLE account; and
  • the recordkeeping and reporting requirements of qualified ABLE programs.


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