Understanding ABLE Accounts: A Key Financial Tool for Individuals with Disabilities
ABLE accounts (Achieving a Better Life Experience) are a transformative financial resource that allow individuals with disabilities to save for their future without jeopardizing their access to essential government benefits like Medicaid and Supplemental Security Income (SSI). These tax-advantaged accounts fall under Section 529A of the Internal Revenue Service Tax code and assist individuals and families in managing the extra costs that come with living with a disability.
Let's dive into how ABLE accounts work!
What is an ABLE Account?
The ABLE Act allows a person whose disability began before age 26, to save money in the ABLE account without affecting most federally funded benefits based on need. Effective January 1, 2026, the onset age of eligibility is expanding to age 46.
Money in an ABLE account grows tax-free, and when used for Qualified Disability Expenses (QDEs), withdrawals are also tax-free.
What Are Qualified Disability Expenses (QDEs)?
QDEs are expenses related to a disability that enhance the individual’s health, independence, and overall well-being. These include:
Healthcare costs (e.g., medical treatments, therapy)
Educational expenses (e.g., tuition, books)
Transportation (e.g., car modifications, public transit)
Housing-related expenses (e.g., rent, home modifications)
Personal support services (e.g., caregivers, drivers)
Assistive technology (e.g., communication devices)
These broad categories give individuals flexibility in using their ABLE funds for a wide variety of needs, helping individuals lead a more independent and fulfilling life.
How Can You Access Funds in an ABLE Account?
Accessing funds in an ABLE account is simple. Account holders or their authorized representatives can withdraw funds via a debit card, checkbook, or bank transfer. As long as the funds are used for QDEs, withdrawals are tax-free. However, if the funds are used for non-qualified expenses, the earnings may be subject to taxes and a 10% penalty on the earnings.
Contribution Limits
In 2025, the standard contribution limit for ABLE accounts remains $19,000 per year. The ABLE-to-Work Act also allows individuals to deposit wages into their ABLE accounts even beyond the $19,000 limit, as long as their employer does not contribute to a retirement account. Working individuals could contribute up to $34,560 in their ABLE account. This is a significant increase, enabling employed individuals with disabilities to save more for their future. The maximum amount for an ABLE account is $100,000.
Increased Costs for Households with Disabilities
Research from the National Disability Institute reveals that households with an adult with a disability face an average increase in living costs of 28%. Learn more here: Extra Costs of Living with a Disability.
How to Find an ABLE Account Program in Your State
ABLE accounts are available through state-specific programs, so it’s important to choose one that fits your needs. To find a program in your state, visit the ABLE account state directory. For more information, the Social Security Administration and the ABLE National Resource Center offer valuable resources and guidance on how ABLE accounts work.
Start saving now!
ABLE accounts are an invaluable financial tool for individuals with disabilities, offering a way to save for the future without losing access to government benefits. With the ability to use funds for QDEs, access easy withdrawals, and contribute more through the ABLE-to-Work provision, these accounts help individuals gain financial independence while managing the additional costs associated with living with a disability.