The Achieving a Better Life Experience (ABLE) Act of 2014 allows qualifying individuals with disabilities to save money in a tax-exempt account that can be used for qualified disability expenses (QDE) without impacting certain government-funded programs.
Here's what you need to know about ABLE accounts and how they work.
What is an ABLE account?
An ABLE account is a tax-advantaged savings account that can help people with disabilities and their families save for disability expenses without losing eligibility for government-funded programs such as Medicaid, and balances below $100,000 do not impact SSI benefits. In most states, you must have less than $2,000 in assets to qualify for these programs.1,2
Once an account is opened, anyone can make contributions, including friends, family, or the account beneficiary. Additionally, any earnings or money used in an ABLE account for qualified disability expenses are not subject to federal income tax.
Who is eligible to open an ABLE account?
Individuals are eligible to open an ABLE account if their disability began before age 26 — beginning in 2026, the age threshold increases to 46. The disability must be verified in one of two ways:
1. The individual already receives SSI or Social Security Disability Insurance payments.
2. A health care provider verifies their diagnosis and confirms the individual has “marked and severe” functional limitations due to the disability.
An ABLE account can be opened by the person with the disability or a Person with Signature Authority (PSA). If they are unable to open their own account, it may be done by their PSA who must be the designated beneficiary's power of attorney, conservator or legal guardian, spouse, parent, sibling, or grandparent; or a representative payee appointed by the Social Security Administration (SSA), in that PSA Hierarchy Order.
The PSA must be a U.S. resident, 18 years or older, and have a valid social security number. The PSA must certify under penalties of perjury that the PSA is authorized to establish an Account for the benefit of the Designated Beneficiary and that there is no other person to do so with a higher priority in accordance with the PSA Hierarchy Order.
How do ABLE accounts work?
ABLE accounts provide a range of investment options, which, depending on your risk tolerance, may give your money the potential to grow over time. Any earnings in an ABLE account grow tax-deferred and are federal income tax free if used for qualified disability expenses, which are expenses related to maintaining or improving the disabled person's quality of life, health, or independence.
How does an ABLE account compare to a special needs trust?
ABLE accounts and special needs trusts can both be used to support individuals with disabilities, while preserving eligibility for benefits like SSI and Medicaid, but they differ in structure, eligibility, and usage. For some individuals and families, an ABLE account is a simpler, more practical alternative to a special needs trust. However, it's also possible to fund both an ABLE account and a special needs trust for the same person. Please consult with a tax and estate planning professional regarding your specific situation.
ABLE account contribution limits
The ABLE contribution limit is tied to the annual federal gift tax exclusion but is calculated based on a modified formula, and as a result, may be higher than the annual federal gift tax exclusion in a given year. For 2026, an ABLE account may receive up to $20,000 in annual contributions.
If a disabled individual is working and not enrolled in a workplace retirement plan like a 401k, they can contribute additional funds to the account. In 2026, they can contribute an additional $15,650 in most states.3
What can you use an ABLE account for?
An ABLE account can be used to pay for qualified disability expenses. It’s a good idea to keep detailed records of your withdrawals in case the IRS requests verification of how the money was used. Here are some of the main expense categories:
- Health care and medical bills
- Housing
- Employment training
- Transportation
- Legal fees and financial management
- Funeral expenses
Advantages of ABLE accounts
Cost. There are minimal fees to set up an ABLE account. You don’t have to hire an attorney like you would for a special needs trust, which can cost thousands to prepare.
Tax benefits. In some states, ABLE account contributions are tax-deductible. Any earnings in an ABLE account grow federal income tax-deferred. If the account holder spends the money on qualified disability expenses, they’ll also enjoy tax-free withdrawals.
Protects eligibility for government programs. ABLE accounts allow disabled individuals to save up to $100,000 in assets without impacting eligibility for certain government programs.
Disadvantages of ABLE accounts
Spending restrictions. ABLE funds must be spent on qualified disability expenses, which may not cover everything. If the disabled individual spends on an unapproved item, they’ll owe income tax and a 10% penalty for the earnings portion (not on the withdrawal). The money might also be considered regular income, which could impact eligibility for government programs.
Asset and contribution limits. Annual contribution limits apply. ABLE account balances in excess of $100,000 as well as distributions for non-qualified purposes may have a negative impact on the beneficiary's eligibility for federal mean-tested programs, including SSI and Medicaid.
Medicaid reimbursements may be due at death. If a person with a disability who was enrolled in Medicaid passes away, and there are unused funds remaining in their ABLE account after all qualified disability expenses have been paid, the state may claim some or all of the funds to recover Medicaid costs.