ABLE Accounts

A tax-free ABLE account lets people with disabilities save some money without affecting their benefits. It also allows family and friends to give them money to use for various expenses.

You can open an ABLE account if your disability began before you turned 26 and meets the Social Security Administration's standards. (SSA has different standards for children, for adults, and for blindness.)

• Build assets in an account that has tax advantages. Your investments in an ABLE account aren't taxed, so your wealth grows faster. Plus, If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit.
• Use your savings on many types of expenses. There are rules about spending the money in your ABLE account, but there’s also a lot of flexibility.
• Save up money without losing benefits. Many benefits programs have resource limits, but:
  • You can have up to $100,000 in your ABLE account and keep getting Supplemental Security Income (SSI) benefits, as long as you meet all other SSI rules. If your ABLE account balance goes over $100,000, your SSI benefits stop. However, if the balance drops back below $100,000, your benefits start up again and you don't have to reapply.
  • No matter how much you have in your ABLE account, the money in it doesn't affect Medicaid, FIP, Freedom to Work, Food Assistance Program, and most other programs with resource limits.

The bottom line: An ABLE account means that if you get a job, you can save up money without losing your benefits. It also lets family and friends give you money without affecting your benefits.

ABLE account rules are introduced below and covered in detail in DB101's ABLE Accounts article.

Opening an ABLE Account

An ABLE account is easy to set up, and you don't need a lawyer or other advisor. You can open your own ABLE account or, if needed, it can be opened for you by a parent, a legal guardian, or someone with a valid power of attorney.

Some states offer ABLE accounts and others don’t. Michigan's ABLE account program is MiABLE.

If you qualify for an ABLE account, you can open one in any state that offers a nationwide program. Although you can only have one ABLE account at a time, you can switch your ABLE account from one state program to another. Compare the ABLE account options in different states.

Rules About ABLE Account Money

There are two limits on how much money can be deposited in an ABLE account in a single calendar year:

• Up to $18,000 in total deposits can come from any source (you, your family and friends, your benefits, and other unearned income), plus
• If you have a job, another $14,580 in deposits can come from your own earned income.
  • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

Important: You need to keep good records, to make sure that too much money isn’t put into your account.

State ABLE programs also have limits on the total amount in your account — typically $200,000 to $500,000, depending on the state. For example, if the cap is $300,000, you cannot make a deposit until your account balance drops below $300,000 again.

You have to use the money in your ABLE account for certain qualifying expenses, like daily living expenses, education, or housing. Many expenses qualify. It's your job to make sure an expense qualifies, and to keep records of how you use your ABLE account money.

If you take money out of your ABLE account but do not use it for qualified disability expenses, you might have to pay income tax on it plus a 10% penalty, and it could affect SSI and other benefits

Learn more in DB101's article about ABLE accounts.