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Understanding ABLE Accounts: What They Are and How They Work
By: Rebecca Miller
For individuals with disabilities and their families, saving for the future has long presented unique challenges due to the asset limits tied to essential government benefits. ABLE accounts — tax-advantaged savings accounts authorized under the Achieving a Better Life Experience (ABLE) Act — have provided a solution since 2014. For many families, these accounts mean greater financial independence and peace of mind. They don’t just make saving easier—they empower individuals with disabilities to plan for their futures with greater flexibility and dignity.
What is an ABLE Account?
An ABLE account is a tax-advantaged savings and investment account designed specifically for individuals with disabilities. Similar to 529 education savings plans, ABLE accounts allow funds to grow tax-free and be withdrawn tax-free when used for qualified disability-related expenses.
Who Can Open an ABLE Account?
An ABLE account can be established for an individual who is entitled to Social Security Disability (SSDI) or Supplemental Security Income (SSI) or who has a disability certification. Currently, only individuals whose disability began before age 26 are eligible, but recent legislation expands eligibility, and, starting January 1, 2026, the eligibility age for ABLE accounts increases to 46.
Who Can Contribute?
Anyone can contribute to an ABLE account — the account beneficiary, family members, friends, or other third parties. This flexibility makes ABLE accounts useful for pooling resources from multiple sources. For families and friends, the ability to contribute directly can be significant. It’s a tangible way to offer long-term support while empowering loved ones to build financial stability and confidence.
How Much Can Be Contributed?
Only one ABLE account is permitted per eligible individual. The 2025 annual contribution limit is $19,000 and remains the same in 2026, subject to annual inflation adjustments in subsequent years. Note that the total of contributions each year cannot exceed the annual limit, even if more than one person contributes.
ABLE to Work Provision
A working ABLE account owner can contribute money to an ABLE account over the $19,000 annual limit due to the ABLE to Work Act. The Act allows employed ABLE account owners who do not participate in an employer-sponsored retirement plan to make additional contributions equal to the lesser of the beneficiary’s earned income for the tax year or the federal poverty line for a one-person household (this amount is currently $15,650). So, an individual could potentially contribute — $19,000 + $15,650 = $34,650 — to an ABLE account within a calendar year. And remember, all earnings on these contributions are tax-deferred.
This provision has been made permanent by recent legislation, effective for contributions made after December 31, 2025.
What Are Qualified Disability Expenses?
ABLE account funds can be used tax-free for “qualified disability expenses,” which are defined broadly to ensure flexibility in meeting the varied needs of individuals with disabilities, and include things like:
- Education and training
- Housing and transportation
- Employment support and training
- Assistive technology and personal support services
- Health care and prevention
- Financial management and administrative services
- Legal fees
- Funeral and burial expenses
- Basic living expenses
Key Benefits of ABLE Accounts
Protection of Government Benefits
Subject to some limits, beneficiaries can save and invest without losing eligibility for most means-tested benefits, such as SSI and Medicaid.
- SSI exemption: The first $100,000 in an ABLE account is disregarded, and only assets above $100,000 count as a resource for the purpose of determining SSI eligibility.
- Medicaid exemption: A beneficiary’s Medicaid can continue when an ABLE account balance exceeds $100,000, so long as the person otherwise remains eligible for Medicaid. At the death of a beneficiary, a portion or all of the balance remaining in the ABLE account may be subject to a claim by the State for repayment for benefits provided to the designated beneficiary under that State’s Medicaid plan. Some states, including Tennessee, have taken steps to limit repayment.
Tax Advantages:
- Tax-free growth on investments in the account
- Tax-free withdrawals when used for qualified disability expenses
- Some states offer state tax deductions for contributions
ABLE accounts can be a valuable tool for individuals with disabilities and their families to save, invest, and plan for the future. Read “What’s New — Recent Legislative Changes Expanding ABLE Account Opportunities,” where we’ll explore changes that expand eligibility, increase contribution flexibility, and make key provisions permanent.
If you have any questions or would like additional assistance navigating ABLE accounts, please contact Rebecca Miller or another member of our estate planning team.
This article provides general information and should not be construed as legal or financial advice. Individuals should consult with qualified legal and financial professionals regarding their specific circumstances.
