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Personal Finance
ABLE Accounts: Tax-Advantaged Savings for Disabilities
ABLE accounts let individuals with disabilities save up to $100,000 without losing SSI or Medicaid benefits, with tax-free growth for qualified disability expenses.
ABLE Accounts: Tax-Advantaged Savings for Disabilities
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What Are ABLE Accounts?
- Tax-advantaged savings accounts created by the ABLE Act of 2014
- Designed for individuals with significant disabilities
- Earnings grow tax-free when used for qualified disability expenses
- Named after the Achieving a Better Life Experience Act
- Available through state-administered programs, similar to 529 plans
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Full Guide
What Are ABLE Accounts?
- Tax-advantaged savings accounts created by the ABLE Act of 2014
- Designed for individuals with significant disabilities
- Earnings grow tax-free when used for qualified disability expenses
- Named after the Achieving a Better Life Experience Act
- Available through state-administered programs, similar to 529 plans
Eligibility Requirements
- The onset of disability must have occurred before age 46 (expanded from 26 in 2026)
- Must meet Social Security's definition of significant disability
- Recipients of SSI or SSDI automatically qualify
- Others can self-certify with a signed disability diagnosis from a physician
- Each eligible individual may have only one ABLE account at a time
Contribution Limits
- Annual contributions are capped at the gift tax exclusion ($19,000 in 2026)
- Employed account owners may contribute additional earned income above the cap
- Anyone can contribute, family, friends, or the account owner themselves
- Total account balance limits vary by state, often $300,000 or more
- Contributions are made with after-tax dollars; there is no federal deduction
Protecting SSI and Medicaid Benefits
- SSI has a strict $2,000 asset limit that ABLE accounts help navigate
- The first $100,000 in an ABLE account is excluded from the SSI asset test
- Balances above $100,000 suspend (but do not terminate) SSI cash benefits
- ABLE account balances are fully excluded from Medicaid asset tests
- This protection makes ABLE accounts a critical planning tool
Qualified Disability Expenses
- Housing, transportation, education, health care, and assistive technology
- Job training, employment support, and financial management services
- Legal fees, funeral and burial costs, and basic living expenses
- The definition is broad, expenses must relate to maintaining quality of life
- Non-qualified withdrawals are taxed on earnings and face a 10% penalty
State Program Differences
- Most states allow residents to open an account in any participating state
- Some states offer state income tax deductions for contributions
- Investment options and fees vary significantly between state programs
- Not all states run their own program; some partner with other states
- Compare fees, investment menus, and tax benefits before choosing a state
Tax Benefits and Planning
- Earnings grow tax-free for qualified disability expenses
- Unused 529 plan funds can be rolled into an ABLE account for the same person
- ABLE accounts can complement special needs trusts in a broader plan
- Upon the account owner's death, remaining funds may be subject to Medicaid payback
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