Reviewed by: HU Medical Review Board | Last updated: June 2023
Living on disability income often means living at or below the poverty line. Qualifying for assistance requires having limited resources. That reality is changing with ABLE accounts.1,2
What are ABLE Accounts?
ABLE Accounts are tax-advantaged saving accounts for people with disabilities and their families. The Stephan Beck Jr. Achieving a Better Life Experience (ABLE) Act of 2014 created ABLE accounts. ABLE accounts are like 529 Education savings accounts but for disability expenses.1-3
Why does the ABLE Act matter?
The ABLE Act is a public policy acknowledging the high cost of living with a disability. Before, public policy did not account for the increased financial burden of living with a disability. The ABLE Act helps address the challenge of needing to meet specific financial criteria to receive benefits.2
Most government disability programs (SSI, Medicaid, FAFSA, HUD, SNAP/food stamps) come with income caps. To stay eligible, a disabled person cannot have more than $2,000 in liquid assets. Liquid assets are cash savings, non-ABLE checking and savings accounts, and some retirement funds. If liquid assets exceed $2,000, those on disability risk losing their benefits.2
Disability is expensive
The cost of needed services is greater than what most on disability are legally allowed to afford. It is a frustrating catch-22. Those on disability need to have more income and saving potential.
As their disease progresses, they often require expensive treatments or assistive devices. They cannot earn more than a certain amount or risk losing their current benefits. These benefits provide some of their financial and medical care. When they need home modifications, mobility devices, or special transportation, they have no resources to afford them.2
The ABLE difference
ABLE Accounts allow those on disability to save money. They can grow their disability-specific financial resources without losing disability benefits. ABLE savings accounts can reach $100,000 before impacting SSI and Medicaid eligibility.1,2,4
Setting up an ABLE account
The beneficiary of an ABLE account is the account owner. A person may only have 1 ABLE account. Where necessary, a parent, guardian, or power of attorney can sign on behalf of the account. Funds are for the support of the disabled person. You can create an ABLE account in your state of residence or another state. Some states do not have active programs. Many states accept out-of-state participants.1,2,4,5
To be eligible for an account, you must prove through medical records that the illness onset was before age 26. On January 1, 2026, that age will increase to 46. The age eligibility changed with the ABLE Age Adjustment Act. This will greatly increase the number of people who can create ABLE accounts.1,2,4,5
Funding an ABLE account
Currently, the maximum yearly contribution to an ABLE account is $17,000. Anyone can make a gift up to that amount without reporting to the IRS. This is a gift tax exclusion. Money gifted to an ABLE account is not federally tax deductible. Any funds deposited must be post-tax contributions (taxes have already been paid on the monies). Only up to $17,000 from all sources can be deposited to an ALBE account in one tax year.1-4
Some people on disability continue to work part-time. If they do not receive contributions to an employer-sponsored retirement account, they can deposit additional funds to ABLE. They can contribute up to whichever is less:1-3
- The person’s compensation for the tax year
- The federal poverty line amount
How are ABLE funds used?
After establishing an account, funds are available for qualified disability expenses. Qualified expenses include:1,2,4,5