529 to ABLE rollover in 2026: permanent, but metered by the $20,000 yearly limit

What the 2025 law changed, in one line

The rollover to ABLE accounts entered the tax code in 2017 with an expiry date written into 26 U.S.C. 529(c)(3)(C)(i)(III): transfers had to happen before January 1, 2026. Section 70117 of Public Law 119-21 deleted the words "before January 1, 2026" and made the change effective for taxable years beginning after December 31, 2025. Nothing else in the rule moved. A family that held off in late 2025 for fear of missing the deadline lost nothing; the same transfer works in 2026 and later years under the same conditions.

The conditions a transfer has to meet

• Who receives it. An ABLE account of the 529's designated beneficiary or of a member of the beneficiary's family. Pub. 970 lists who counts: children and their descendants, siblings and step-siblings, parents and their ancestors, step-parents, nieces and nephews, aunts and uncles, in-laws, the spouse of any of them, and first cousins.
• How fast. The amount must be paid into the ABLE account within 60 days after the 529 distribution. A direct transfer between the two programs avoids counting days.
• How much. The part of the rollover that, added to every other contribution made to that ABLE account for the year, passes the limit of section 529A(b)(2)(B)(i) does not qualify. For 2026 that limit is $20,000 (Rev. Proc. 2025-32, section 4.34).
• Who can own the ABLE account. An eligible individual with blindness or a disability that meets the tests in IRS Publication 907, including an age by which it began. Read the current edition and the ABLE program's own rules before planning on it.

The ABLE program should be contacted before the money moves. Pub. 970 says so in a caution box, so that the transfer does not push the year's contributions past the limit. The 529 plan cannot know what relatives or the beneficiary already deposited.

Jonah's balance, spread over 4 years

Jonah is 19. His parents opened a 529 when he was born, and $52,000 is still there after a diagnosis changed his plans. He now has an ABLE account to which an aunt adds $3,000 every year. That leaves $17,000 of room each year for the 529 rollover. Assuming the aunt keeps giving and the limit stays at its 2026 level, the balance empties in 4 calendar years. If the limit rises with inflation later, each slice gets a little larger.

The order of deposits within a year matters little for tax, but it matters for the cap. If the aunt's check arrives after the rollover filled the limit, her gift is the excess. Pub. 907 says excess contributions and their earnings must be returned by the due date of the beneficiary's return, and a 6 % excise tax applies to what stays. Scheduling the 529 rollover late in the year, after family gifts are known, is the simplest guard.

With $6,500 already deposited, a family that wanted to move $18,000 can roll $13,500. The rest waits for January or stays in the 529 for any education cost that still comes up.

Gifts already used the room

In a year where grandparents and friends gave $14,000 directly to the ABLE account, a $9,000 rollover does not fit: the calculator returns $6,000. Nothing is lost by waiting. The 529 keeps growing under its own rules, and the next calendar year brings a fresh limit.

One detail of the limit is easy to miss. Pub. 907 lets an employed ABLE beneficiary add an extra amount from their own pay on top of the standard yearly limit, under conditions about workplace retirement plans. The 529 rule refers only to the standard limit of section 529A(b)(2)(B)(i), so a rollover cannot use that extra room.

Once the money is in the ABLE account

The IRS page on ABLE accounts and Pub. 907 describe the account the money joins. Distributions are tax-free when they pay qualified disability expenses, a list far wider than tuition: education, housing, transportation, employment training, assistive technology, health, financial management, legal fees and funeral costs among others. A distribution above those expenses has its earnings share taxed, plus 10 %. A beneficiary may hold only one ABLE account at a time, and the account balance is generally disregarded when SSI eligibility is figured. On the beneficiary's death, a state may claim repayment of Medicaid benefits paid after the account was opened. That is the trade being made: broader spending and benefit protection in exchange for a yearly cap and a possible state claim.

The 2025 law also created a second path into ABLE accounts. A Trump account can move its entire balance to the child's ABLE account in the calendar year the child turns 17, and that transfer is exempt from the ABLE yearly limit, unlike the 529 rollover (Trump accounts and the 529).

State treatment found in official texts

Federal law excludes the rollover from income; states decide for themselves whether their own deduction comes back. Here is every state in our data whose revenue department or plan text mentions ABLE accounts, quoted from the state notes as read. A state absent from this table had no ABLE statement in the texts we read, which does not mean it has none.

In Colorado, Kansas, the yearly deduction cap is shared between 529 and ABLE contributions for the same beneficiary, so a family funding both accounts reaches the state cap sooner.

Before rolling an account on which you claimed a state deduction, read the recapture rules and your state page. Where the state is silent, a written answer from the plan or the revenue department is worth having in the file.