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Family members with disabilities may benefit from ABLE accounts

If you have family members with disabilities, you may be able to save for their needs in a tax-advantaged way without losing eligibility for other government benefits they are entitled to.

What is an ABLE account?

An Achieving a Better Life Experience (ABLE) account is a tax-free account that can be used for disability-related expenses. ABLE accounts can be started by eligible individuals to provide support for themselves. They can also be set up by family members to support their dependents, or by guardians for the benefit of those they are responsible for. There are no limits to who can contribute to an ABLE account, and while the contributions are not tax-deductible, the funds placed in the account are invested and grow tax-free.

How to qualify for an ABLE account

To be eligible for an ABLE account, an individual must be blind or disabled and must have become so before turning age 26. However, with the passage of the SECURE 2.0 act, this age will increase to 46 beginning on January 1, 2026.

Eligible individuals must be entitled to Supplemental Security Income benefits (SSI), or Social Security Disability Insurance (SSDI) programs. Alternatively, an individual can become eligible if a disability certificate is filed with the IRS for them.

Expenses for maintaining or improving a beneficiary’s health, independence, or quality of life qualify as tax-free in an ABLE account. This includes education costs, housing, transportation, employment support, health and wellness costs, assistive technology, personal support services, and other IRS-approved expenses. Distributions used for nonqualified expenses are subject to income tax on the portion that represents earnings and a 10% penalty.

Some specific details for ABLE accounts include:

  • Eligible individuals may only have one ABLE account. Contributions up to the annual gift-tax exclusion amount (currently $17,000) can be made to an ABLE account each year. A beneficiary that works may contribute any amount of their income to their account (limited to the poverty-line amount for a one-person household.)
  • The total account balance of an ABLE account is also limited. This limit, which differs from state to state, is equal to the limit imposed by that state on qualified tuition (Section 529) plans.
  • ABLE accounts do not affect an individual’s Medicaid eligibility. However, ABLE account balances above $100,000 are counted toward the SSI program’s $2,000 individual resource limit. Accounts with balances exceeding $102,000 will cause an individual’s SSI benefits to be suspended (not terminated), assuming they have no other assets. Additionally, distributions from an ABLE account used to pay housing expenses count toward the SSI income limit.
  • The designated beneficiary can claim the saver’s credit for contributions on his or her ABLE account if made before 2026.

Because ABLE accounts are established under state programs, there are many to choose from. An account may be opened under any state’s program if that state allows out-of-state participants. The funds added to an ABLE account can be invested in a variety of options and the investment choices can be changed twice a year.

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