What Is an ABLE Account?

ABLE accounts allow individuals with disabilities to save money using a tax-advantaged account. Congress created these accounts under the 2014 Achieving a Better Life Experience (ABLE) Act. The law aims to simplify how individuals with disabilities cover qualified expenses. Before opening an ABLE account, take time to understand how they work and who qualifies.

You can also work with a financial advisor as you develop a financial strategy for your family. Find an advisor who serves your area.

What Is an ABLE Account?

An ABLE account is a tax-advantaged savings program for eligible people with disabilities, known as designated beneficiaries. Money saved in an ABLE account can be used by a designated beneficiary to help pay for qualified disability expenses. Withdrawals are tax-free when used for qualified expenses, similar to the way funds in a 529 plan can be withdrawn tax-free when used for higher education.

The Tax Cuts and Jobs Act of 2017 expanded some of the provisions of the original ABLE Act. That included:

Increasing contribution limits to ABLE accounts
Allowing the designated beneficiary of an ABLE account to claim the saver’s credit for their contributions
Permitting rollovers from a 529 qualified tuition program to an ABLE account (when the designated beneficiary of both accounts is the same person)

ABLE accounts don’t function as retirement savings accounts. Instead, ABLE accounts help reduce the financial burden of paying for expenses related to disability easier to bear while offering some tax benefits to savers.

How an ABLE Account Works

An ABLE account works by allowing a designated beneficiary to save money for disability expenses on a tax-advantaged basis. Each designated beneficiary may open one ABLE account but anyone may contribute to the account on behalf of the beneficiary. Contributions made by others follow the annual gift tax exclusion. For 2025, the limit is $19,000 for individuals and $38,000 for married couples filing jointly. Again, this is largely similar to the way a 529 plan works.

Account earnings grow tax-deferred. Withdrawals are tax-free when used for qualified disability expenses. This includes costs related to:

Education
Housing
Transportation
Employment training and support
Health, prevention and wellness
Assistive technology and related services
Financial management services
Legal fees
Everyday living expenses

An ABLE account can also be used to pay for funeral and burial expenses after the designated beneficiary passes away. Rollovers to an ABLE account from a 529 plan are allowed on behalf of a designated beneficiary or family member. The rollover amount is limited to $19,000 for 2025.

Who Qualifies for an ABLE Account?

ABLE accounts have one designated beneficiary who owns the account. In order to own an ABLE account, one of the following must be true:

You’re eligible for Supplemental Security Income (SSI) due to a disability or blindness that began before age 26
You’re eligible to receive disability insurance benefits, childhood disability benefits or disabled widow’s or widower’s benefits based on disability or blindness that began before age 26
You’ve certified or had a parent or guardian certify that you met the criteria for disability certified before age 26

Parents can establish ABLE accounts on behalf of disabled children or adults can do so for themselves. Any distributions from the account are intended to be used only for the benefit of the designated beneficiary. If the designated beneficiary is unable to make withdrawals on their own behalf or is a minor, someone with signature authority (i.e. a parent or guardian) can assume control of the account for them.

Tax Benefits and Contribution Limits of ABLE Accounts

The main tax benefit associated with ABLE accounts is the ability to withdraw money on a tax-free basis when that money is used for qualified disability expenses. You can, however, run into tax trouble if you use money in the account for a non-qualified expense. The IRS can assess income tax on any earnings withdrawn and apply a 10% withdrawal penalty.

In terms of contributions, the annual contribution limit follows the annual gift tax exclusion limit. Again, the 2025 limits are $19,000 for individuals and $38,000 for married couples who file a joint return. ABLE account owners who are working may be able to contribute additional funds above this limit. Additional contributions are capped at the lower of the federal poverty level for one person or the beneficiary’s gross income for the year.

It’s important to note that ABLE account balances generally don’t affect a beneficiary’s eligibility for SSI, Medicaid or other public benefit programs, up to a certain limit. Once the balance reaches $100,000 those benefits can be suspended. The SSA reinstates benefits once the balance falls below $100,000.

How to Open an ABLE Account

It’s possible to open an ABLE account online with as little as $25 to $50. Each state has its own ABLE website, but you can open an account in any state regardless of residency. You can choose the plan that looks most attractive to you.

When opening an ABLE account, consider the investment options offered, which may include mutual funds and exchange-traded funds (ETFs). The range of investment options can vary from plan to plan. Also, look at whether any tax deduction may be available for contributions.

The majority of states do not allow you to deduct contributions but a handful do offer some type of tax benefit. There’s no federal tax deduction for contributions. In addition to investment options, take the fees you might pay into account. Mutual funds and ETFs charge expense ratios, which reflect the annual cost of ownership. The higher these fees are, the more they can detract from your investment returns.

Bottom Line

Understanding ABLE accounts and how they work is important if you have a disability or a disabled family member. ABLE accounts help cover qualified expenses and allow disabled individuals to receive benefits or work, if able. That can be invaluable for managing the cost of care over a lifetime.

Financial Planning Tips

Consider talking to a financial advisor about whether an ABLE account might be something you need, either for yourself or a disabled family member. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you have a disabled dependent, you may also consider establishing a special needs trust on their behalf. A special needs trust is designed to hold money and other assets that are to be used to pay for the care of a special needs dependent. Setting up this type of trust can also allow a disabled dependent to remain eligible for SSI benefits, Medicaid and other government benefit programs.