The ABLE Account

In 2014, Congress passed the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act. It was originated by a group of parents who recognized that it was unfair they could not save funds in their child’s name without harming their eligibility for important benefits they may need. These accounts allow qualified individuals with disabilities the opportunity to save money in a tax-exempt account that can be used for qualified disability expenses (QDE’s) without harming their eligibility for means-tested public benefits.

Who is eligible?

Eligibility is limited to individuals with disabilities with an age of onset of disability before turning 26 years of age and must meet the Social Securities definition and criteria regarding functional limitations.

How much can be contributed?

In 2022, the contribution maximum is $16,000 per year. If the ABLE account owner is working but not contributing to a retirement account such as a 401k or 403b, they can also contribute their gross income from that year, up to $12,880 plus the $2,000 SAVERS CREDIT. In that case, they can save up to $30,880 per year in their account.

Who can contribute?

Anyone can contribute to an ABLE Account, including family, friends, and the account holder.

How can funds be used?

Funds must be used for qualified disability expenses to remain tax-free. A qualified disability expense is any expense related to the account owner’s disability that assists them in increasing or maintaining their health, independence, and/or quality of life. It is recommended that receipts are saved for purchases in case the IRS comes back with questions.