On July 4, 2025, Congress enacted the One Big Beautiful Bill Act (OBBBA), a sweeping legislative package that revised federal tax rules and transfer laws. Although much of the national dialogue has focused on revisions to estate and gift taxes, the measure also brought meaningful updates to ABLE accounts. For Hoosiers with disabilities and their families, these new provisions affect how accounts can be opened, funded, and utilized. To help families understand the impact, the Indianapolis attorneys at Frank & Kraft outline the purpose of ABLE accounts, why they are essential, and how the OBBBA has altered their operation.
Understanding ABLE Accounts
An ABLE account, short for Achieving a Better Life Experience account, is a savings tool designed to give individuals with disabilities the ability to set aside money for qualified expenses while still maintaining eligibility for important public benefits. Since their creation in 2014, ABLE accounts have provided a way for families to save without jeopardizing programs such as Medicaid and Supplemental Security Income (SSI). Withdrawals used for approved expenses are not counted against benefit eligibility, provided they are spent properly.
What Counts As Qualified Disability Expenses (QDEs)?
The Internal Revenue Service broadly defines Qualified Disability Expenses to reflect the diverse needs of people with disabilities. These costs are meant to improve health, independence, and daily living and may include things such as:
- Medical Care: Doctor visits, therapy sessions, prescription medication, or mental health support.
- Professional Support: Financial planning or legal assistance related to disability needs.
- Support Services: Respite care, personal attendants, or mobility equipment.
- Education: Tuition, adaptive learning materials, and specialized training.
- Housing: Rent, utilities, mortgage payments, or accessibility modifications.
- Transportation: Wheelchair-accessible vehicles, rideshares, or bus passes.
- Employment-Related Costs: Adaptive tools, job training programs, or coaching.
Significant Updates Under the OBBBA
The OBBBA builds on prior legislation, such as the ABLE Age Adjustment Act, and stands as one of the most significant shifts in disability savings law in recent memory. For Indiana families, the following provisions are especially important:
- Expanded Age of Onset Requirement: Perhaps the most transformative update is the increase in the age of disability onset for eligibility. Previously, only individuals whose disability began before turning 26 could open an ABLE account. Beginning January 1, 2026, the threshold rises to age 46. This expansion opens eligibility to a much larger group, including many adults who develop disabilities later in life due to illness, injury, or mental health conditions. For Indiana families, this offers long-awaited access to ABLE accounts for individuals who were previously excluded.
- Permanent 529 Plan Transfers: Families frequently use 529 plans to save for higher education. If funds remain unused, options were once limited. The new law permanently allows tax-free rollovers from 529 plans into ABLE accounts. This gives Indiana households the flexibility to redirect savings originally earmarked for education toward supporting a disabled family member.
- Saver’s Credit Eligibility: Another notable change involves the federal Saver’s Credit, which offers a tax incentive for lower- and middle-income savers. Starting in 2027, contributions to ABLE accounts will qualify. The maximum eligible contribution rises to $2,100, with a credit of up to $1,050. For Indiana residents, this means not only tax-deferred growth inside the account but also a reduction in their yearly tax bill.
- Permanent ABLE-to-Work Rule: Before passage of the OBBBA, the ability of employed beneficiaries to contribute beyond the standard annual cap under the ABLE-to-Work program was temporary. That option is now permanent. The basic annual contribution cap remains $19,000 in 2025. In addition, a working beneficiary may deposit an extra amount equal to wages earned or the federal poverty level, whichever is less, if they are not also funding an employer-sponsored retirement account. For people with disabilities in Indiana, this ensures a long-term path to boost savings while keeping benefits intact.
OBBBA Changes and Your Indiana ABLE Account
These changes enacted because of the OBBBA are definitely important for Indiana families with ABLE accounts; however, ABLE accounts remain limited in scope even with the new changes. Contribution caps still apply, and once balances exceed certain levels, SSI eligibility can be impacted. For families with significant assets or more complex planning needs, special needs trusts remain an essential complement to ABLE accounts. Talk to your estate planning attorney to review and update your overall special needs plan to ensure that your loved one with special needs is protected.
Do You Have Questions about How the OBBBA Impacts Your Indiana ABLE Account?
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about how the OBBBA impacts your Indiana ABLE account, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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