Rules for Making ABLE Deposits

Here are some important rules to think about related to putting money in an ABLE account:

  1. There are limits on how much you can deposit each year.
  2. You can’t make deposits if your total account value goes over a certain level.
  3. You can move money from a 529 education account into an ABLE account.

These rules are explained in more detail below.

1. Yearly Deposit Limits

There are two limits on how much money can be put in your ABLE account each calendar year:

  • Up to $15,000 in total deposits can come from any source — you, your family and friends, your benefits, and other unearned income, and
  • If you have a job, you can deposit another $12,140 of your own earned income.

Combined, this means that if you work, you could save as much as $27,140 in your ABLE account in 2019.

Keep good records

You must make sure too much money isn’t put into your account each year, even if other people are making deposits. Keep good records, or else you could have problems later.

Important: Taking money out of your account doesn’t mean you can put more in. The deposit limits are on how much total money is put into the account each year. Taking some out doesn’t change that.

Example

Sam gets Supplemental Security Income (SSI) and Medicaid benefits. He doesn’t work, so he has no earned income.

Sam’s mother helps him by putting $500 a month into Sam’s ABLE account. Sam’s done the math and knows that by the end of the year, his mother will have deposited a total of $6,000. Sam’s brother also helps out, by making a big $5,000 deposit into Sam’s ABLE account in February. Combined, his mother and brother will put $11,000 into Sam’s ABLE account over the course of the year.

For the rest of the year, the most Sam or anyone else deposits can only add up to $15,000. Even if Sam spends $10,000 on qualified expenses by November and the balance in his ABLE account drops, only $4,000 can be added to the account until the end of the year.

2. Deposit Limit if Your ABLE Account Has a Lot of Money

Each state sets a maximum amount that can be in an ABLE account, which might be $200,000 – $500,000 or more. If your ABLE account reaches the maximum amount, you cannot make any more deposits until the account balance drops back down. Note: This limit doesn’t affect many people.

Example

Evelyn has an ABLE account in a state that doesn’t let her make deposits if the total value of her account is $400,000 or more.

Right now, Evelyn only has $5,000 in her ABLE account. Even if she deposits as much as she can for many years, she still won’t be close to the $400,000 limit where she isn’t allowed to make any deposits anymore.

3. Moving Money from 529 Accounts to ABLE Accounts

529 accounts are a type of account that lets people save money for college or other educational expenses. They work very similarly to ABLE accounts. In fact, they are so similar that ABLE accounts are officially called “529A accounts.”

Money from a 529 account can be rolled over tax-free into an ABLE account. That means money can be moved from a 529 account and into an ABLE account with no penalties. In this way, money that hasn’t been or won’t be used for educational expenses can instead be used for any qualified disability-related expenses from an ABLE account.

Here are a couple of important things to understand about rolling money over from a 529 account to an ABLE account:

  • The 529 account must be in the name of the ABLE account owner or a family member, and
  • The rollover counts toward the ABLE account annual deposit limit for all sources other than your own earned income ($15,000 in 2019).
Example

Maria has $10,000 in a 529 educational savings account her parents set up when she was younger. Now 25, Maria isn’t in school anymore and doesn’t plan to return to school. If she just takes the money out of the 529 account and spends it on other things, she’ll have to pay taxes and a penalty.

But instead, Maria rolls over the $10,000 tax-free from the 529 account into an ABLE account, which she can open because she’s legally blind. Now, she can use the money on disability-related expenses without paying taxes or penalties.

Maria remembers to write down that she has already deposited $10,000 for 2019 into her account, so that she can make sure not to go over the $15,000 annual limit on contributions from sources other than her own earnings.

Since she has a job, Maria knows that she can separately deposit up to $12,140 from her earnings into her ABLE account.