What an ABLE account is and who can open one

An ABLE account is a tax-advantaged savings account created by federal law for people with disabilities. Money you put in grows without being taxed, and you can withdraw it tax-free as long as you use it for "may have access to disability expenses" — costs related to your disability or general living expenses.

You can open an ABLE account if you became disabled before age 26 and your disability is expected to last at least 12 months or result in death. The disability does not have to be visible or physical — it includes mental health conditions, learning disabilities, and chronic illnesses that substantially limit major life activities. You do not need to be receiving Social Security or any government benefit to open one.

Each person can have only one ABLE account, but a parent, guardian, or authorized representative can open and manage an account on behalf of someone who cannot manage their own finances. The account belongs to the person with the disability, not the person who opens it.

Key Takeaways

  • ABLE accounts let you save up to $18,000 per year (as of 2024, though this amount may change) without losing means-tested benefits like SSI or Medicaid.
  • Money in the account grows tax-free and can be withdrawn tax-free for disability-related expenses, medical costs, education, housing, and other may have access to expenses.
  • You must have become disabled before age 26 and have a disability expected to last at least 12 months to open an account.
  • Each state runs its own ABLE program, and you choose which state's program to use regardless of where you live.
  • Once your account balance reaches $100,000, you may lose SSI (Supplemental Security Income) but keep Medicaid, so planning matters if you receive SSI.

How ABLE accounts protect your benefits

The main reason people with disabilities use ABLE accounts is that the money inside does not count against the resource limits for Supplemental Security Income (SSI) or Medicaid. SSI normally stops if you have more than $2,000 in countable resources; Medicaid in most states has similar limits. An ABLE account sits outside those limits.

This protection has a catch: once your ABLE account reaches $100,000, you lose SSI payments (though not Medicaid in most states). The account itself remains yours and you can keep using it, but the monthly SSI check stops. If your account drops back below $100,000, SSI restarts. This makes ABLE accounts useful for saving without when ready losing benefits, but you need to plan if you are receiving SSI.

Money from other sources — wages, gifts, inheritance — can go into your ABLE account. If you work, your earnings do not count against SSI work incentives the way money in a regular savings account would. This makes ABLE accounts especially useful if you are working and want to save without triggering benefit reductions.

What you can spend ABLE account money on

The law defines "may have access to disability expenses" broadly. They include medical and dental care, therapy and counseling, assistive technology and equipment, education and job training, housing costs (rent, mortgage, property tax, utilities, home modification), transportation, employment support services, and basic living expenses like food and clothing.

You can also spend ABLE account money on less obvious things: a service dog, personal care attendants, legal fees related to your disability, work expenses that are not covered by your employer, and even funeral and burial planning. The IRS publishes a full list, and most reasonable disability-related expenses may have access to.

The account does not require you to prove each expense is disability-related before you withdraw the money. You withdraw it, and the burden is on you to keep records showing it was spent on a may have access to expense. The IRS can audit this, so keep receipts and documentation.

How to open an ABLE account

Each state runs its own ABLE program, and you choose which state to use — you do not have to use your home state. Some states' programs have lower fees, better investment options, or simpler websites than others. The National Disability Institute maintains a list of all state programs with links to each one.

To open an account, you will need proof of your disability. This can be a letter from your doctor, a copy of your Social Security award letter if you receive SSI or SSDI, or documentation from the Veterans Administration if you are a veteran. You will also need a Social Security number and a government-issued ID.

The process is online in most states and takes 15 to 30 minutes. You choose how much to deposit initially (some programs allow $0 to start), pick your investment options (usually a choice between conservative and growth-oriented portfolios), and confirm your information. Most accounts are active within a few business days.

Contribution limits and annual rules

You can contribute up to $18,000 per year to your ABLE account as of 2024. This limit is the same as the annual gift tax exclusion and changes each year based on inflation. If you are working, you can contribute additional money beyond the $18,000 limit — up to your annual earned income or $39,000 total (as of 2024), whichever is less. These numbers change yearly, so check your state's program website for the current year's limits.

There is no upper limit on how much can be in your account, but remember that once it reaches $100,000, SSI stops (though Medicaid continues in most states). You can withdraw money anytime without penalty, but withdrawals for non-may have access to expenses are taxed on the earnings portion and subject to a 10 percent penalty — similar to an early withdrawal from a retirement account.

You do not have to contribute every year, and you do not have to use all your contribution room. If you do not contribute in one year, you cannot carry the unused amount forward to the next year.

Investment options and account fees

Most state ABLE programs offer a small menu of investment portfolios — usually three to five options ranging from conservative (mostly bonds and stable value funds) to aggressive (mostly stocks). You pick one when you open the account and can change it a few times per year, though the exact rules vary by state.

Account fees also vary by state. Some programs charge no annual fee; others charge $12 to $36 per year. A few charge a small percentage of your balance. Investment expense ratios (the cost of the funds themselves) range from very low (under 0.10 percent) to moderate (around 0.50 percent). Before opening an account, compare the fees and investment options across a few state programs — the difference can add up over time.

If you are not comfortable choosing investments yourself, some programs offer a "default" option that automatically adjusts from growth-focused to conservative as you age, similar to a target-date retirement fund.

ABLE accounts and other benefits

ABLE accounts do not affect SSDI (Social Security Disability Insurance), which is based on work history, not resources. They also do not affect most other means-tested programs like SNAP (food information) or housing vouchers, though some state programs have their own rules — check with your local benefits office if you receive other information.

If you are a student, money in an ABLE account does not count as a resource for federal student aid purposes. If you receive Medicaid, the account does not affect your coverage in most states, even after it reaches $100,000 (though a few states have different rules, so verify with your state Medicaid office).

If someone else contributes to your ABLE account — a parent, relative, or friend — that is treated as a gift for tax purposes and does not create income for you. The person making the gift may have tax reporting requirements if they give more than the annual gift tax exclusion, but that is their responsibility, not yours.

Frequently Asked Questions

Can I have an ABLE account and a 529 education savings plan at the same time?

Yes. A 529 plan is for education expenses and does not count as a resource for SSI or Medicaid. You can use both accounts — the ABLE account for general disability expenses and the 529 for education costs. If you use 529 money for non-education expenses, it triggers taxes and penalties, so keep them separate.

What happens to my ABLE account if I move to a different state?

Your account stays with the state program you chose, even if you move. You do not have to switch to your new state's program unless you want to. Some people move their account if the new state has lower fees or better investment options, but it is not required.

Can I use my ABLE account to pay for a car or vehicle?

Yes, if the vehicle is used for transportation related to your disability or employment. This includes a personal car, a modified vehicle, or public transportation passes. You cannot use it to buy a luxury vehicle or a second car purely for recreation, but a reliable used car for getting to work or medical appointments qualifies.

What if I no longer have a disability or my disability improves?

You can keep the account open and use the money for any purpose, but withdrawals for non-may have access to expenses are taxed on the earnings and subject to a 10 percent penalty. If your disability is determined to have ended by Social Security, you will receive notice, but the account itself does not close automatically.

Can I name a beneficiary for my ABLE account?

Most state programs allow you to name a beneficiary who inherits the account if you die. The rules vary by state — some programs transfer the account to the beneficiary; others require the beneficiary to open their own ABLE account and transfer the money. Check your state's program for their specific process.