On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), a far-reaching legislative reform that reshaped federal tax and transfer rules. While much attention has been directed at revisions to estate and gift tax laws, the measure also introduced important changes to ABLE accounts. For Californians living with disabilities and their families, these provisions influence how accounts are created, funded, and used. To clarify what the new law means, the Los Angeles attorneys at Schomer Law Group, APC explain the role of ABLE accounts, why they matter, and what has changed under the OBBBA.
What Is an ABLE Account?
An ABLE account, short for “Achieving a Better Life Experience,” is a special savings account designed to give individuals with qualifying disabilities the ability to save for expenses without losing access to critical public assistance programs. Since Congress authorized them in 2014, ABLE accounts have allowed families to set aside money for specific needs while maintaining eligibility for programs like Medicaid and Supplemental Security Income (SSI). Funds withdrawn for approved uses do not jeopardize benefits if the spending is consistent with the rules.
Qualified Disability Expenses (QDEs)
The Internal Revenue Service has defined Qualified Disability Expenses in a broad way, reflecting the diverse and evolving needs of individuals with disabilities. These expenses must support health, independence, or quality of life and include things such as:
- Healthcare Needs: Routine medical treatment, prescription drugs, rehabilitation services, or mental health care.
- Housing Costs: Rent, utilities, mortgage payments, or structural accessibility modifications.
- Transportation: Adaptive vehicles, public transportation, or rideshare services.
- Educational Expenses: Tuition, tutoring, or specialized training materials.
- Employment Support: Tools or programs needed to secure and maintain employment.
- Personal Services: Respite care, daily support aides, or durable medical equipment.
- Professional Advice: Financial planning, legal guidance, or benefits counseling.
Key Revisions Under the OBBBA
The OBBBA represents one of the most comprehensive updates to disability savings law since ABLE accounts were first introduced. For families in California, several provisions stand out:
- Higher Age of Onset Rule: The most significant change is the extension of the age requirement to qualify for an ABLE account. Previously, eligibility was restricted to individuals whose disability began before age 26. Starting January 1, 2026, the threshold will be raised to age 46. This change broadens eligibility to include thousands of Californians who acquired disabilities later in life because of an accident, chronic illnesses, or mental health conditions. For many, this marks the first opportunity to use an ABLE account.
- Permanent Transfers from 529 Plans: Families often save for higher education through 529 plans. If those funds go unused, choices were once limited. The OBBBA permanently authorizes tax-free rollovers from a 529 education plan into an ABLE account. This change provides California families with the ability to redirect leftover education savings into disability-related support without triggering taxes or penalties.
- Saver’s Credit Inclusion: Beginning in 2027, ABLE account contributions will qualify for the federal Saver’s Credit, an incentive intended to encourage lower- and middle-income individuals to save. Eligible contributions of up to $2,100 can generate a credit of as much as $1,050. For Californians, this means an opportunity to reduce tax liability while continuing to benefit from tax-deferred account growth.
- Permanent ABLE-to-Work Provision: The ABLE-to-Work program, which allowed working beneficiaries to contribute additional amounts above the annual cap, was previously temporary. The OBBBA made this option permanent. In 2025, the standard annual contribution cap remains $19,000. A beneficiary with employment income may contribute extra, up to the lesser of their wages or the federal poverty guidelines, if they are not making retirement contributions through an employer. This provision ensures Californians with disabilities who are employed can save more without sacrificing eligibility for government assistance.
What These Changes Mean for California Families
The updates to ABLE accounts under the OBBBA expand opportunities and flexibility for individuals with disabilities. More people will now qualify, additional funding options exist, and tax incentives are available to encourage contributions. These revisions make ABLE accounts more accessible and more effective as a planning tool for Californians.
Contribution limits, though, still apply, and once balances surpass certain thresholds, SSI benefits may be reduced. ABLE accounts also have restrictions on how funds can be used. Families with larger estates or more complex financial concerns will still benefit from pairing an ABLE account with a special needs trust. Special needs trusts remain critical for protecting significant assets and ensuring long-term financial stability while preserving public benefit eligibility.
Can We Help You Incorporate the OBBBA Changes into Your California ABLE Account?
For more information, please join us for an upcoming FREE seminar. If you would like assistance to incorporate the recent OBBBA changes into your California ABLE account, contact the experienced Los Angeles special needs planning attorneys at Schomer Law Group APC by calling (310) 337-7696 to schedule an appointment.
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