Understanding the ABLE Act

The Achieving a Better Life Experience (ABLE) Act was signed into law in December 2014. Its purpose is to give individuals with disabilities and their families a way to save money for disability-related needs tax-free, without jeopardizing eligibility for vital benefits like Medicaid and Supplemental Security Income (SSI).

An ABLE account works much like a 529 education savings plan but is designed specifically for disability expenses. Families can save significant funds in these accounts while protecting eligibility for need-based programs.

Who Qualifies for an ABLE Account?

To open an ABLE account, the beneficiary must:

• Have had the onset of their disability before age 26 (expanded to before age 46 under the ABLE Age Adjustment Act effective January 1, 2026).
• Receive Social Security Disability Insurance (SSDI) or provide a disability certification that meets IRS requirements.

The person does not need to be under age 26 when the account is created—only when the disability began.

What Expenses Can ABLE Funds Cover?

Qualified expenses include a wide range of disability-related needs, such as:

• Education and training
• Housing and utilities
• Transportation
• Employment support services
• Assistive technology
• Health, prevention, and wellness
• Personal support services
• Financial and legal services
• Funeral and burial expenses

States may approve additional qualified expenses under their own rules.

Contribution Limits in 2025

• Annual limit: $18,000 (increased for inflation in 2024). This includes contributions from family and friends combined.
• State limits: Each state sets its own lifetime maximum, typically in line with 529 plan limits (often $300,000–$500,000).
• SSI rule: If the account balance exceeds $100,000, SSI payments are suspended until the balance drops below that threshold. Medicaid eligibility, however, is not affected, regardless of account value.

How Do ABLE Accounts Work?

• Tax benefits: Earnings grow tax-free if used for qualified expenses. Withdrawals for non-qualified expenses are taxed and face a 10% federal penalty.
• Contributions: No federal tax deduction for contributions, but some states offer state income tax incentives.
• Estate recovery: Upon the beneficiary’s death, a state Medicaid agency may claim reimbursement for Medicaid services provided, depending on state law.

Availability Across the U.S.

As of 2025, most states (and the District of Columbia) offer ABLE programs. Even if your state does not, you can typically enroll in another state’s plan, as many accept out-of-state residents.

Why ABLE Accounts Matter

An ABLE account can be life-changing for people with disabilities and their families. It allows families to save for essential needs while protecting eligibility for critical benefits.

📞 If you’d like to learn more about ABLE accounts or need guidance setting one up, contact our office today at (207) 848-5600.