A tax-free Achieving a Better Life Experience (ABLE) account lets people with disabilities save for their future without affecting their benefits. It also lets family and friends give them money.

If you have a qualifying disability that began before you turned 26, you may be able to save up to $27,060 each year in an ABLE account without affecting Medicaid, Supplemental Security Income (SSI), and most other benefits, as long as you meet all the other benefits rules.

Of that $27,060 per year, up to $15,000 can come from any source, including your family, friends, benefits, or other unearned income. If you have a job, you can save up to another $12,060, which can only come from your own earned income.

An ABLE account lets you:

  • Build up savings without affecting your benefits: Up to $100,000 in your ABLE account won’t affect your SSI benefits. And no matter how much you have in your ABLE account, the money in it won’t affect Medicaid, Kentucky Transitional Assistance Program (K-TAP), Supplemental Nutrition Assistance Program (SNAP), and most other programs with a resource limit.
  • Get money from family and friends without affecting your benefits: Whether you earn the money yourself or it’s a gift from others, up to $15,000 each year can be added to your ABLE account without any changes in your SSI or other benefits.
  • Have a job, and save some or all of your earned income in your ABLE account.
  • Spend the money saved in your ABLE account on many types of daily expenses, not just medical costs: There are rules about how to spend the money, but there’s also a lot of flexibility.
  • Enjoy tax advantages: The growth of the investments in an ABLE account isn’t taxed, so your wealth will grow faster. However, when you take money out of the account, you have to spend it on qualified disability-related expenses, or it will be taxed as income.

ABLE programs are set up by each state. Kentucky's ABLE account program is STABLE Kentucky, which is only open to Kentucky residents. The ABLE National Resource Center provides details about the ABLE programs in other states.

If you qualify, you can open an ABLE account in any state that has an ABLE program open to customers nationwide (you do not have to live in the state where you open an ABLE account). However, you can only open one ABLE account, so you need to decide which state offers the ABLE program that works best for you. The good news is that you can switch your ABLE account from one state program to another. You do not have to stick with the first state program you choose.

When did ABLE start?

The federal Achieving a Better Life Experience Act was signed into law in December 2014. The first ABLE programs opened to the public in 2016.

An ABLE account can be set up in addition to a Special Needs Trust, but an ABLE account costs less to set up and gives you more choice and control. Individuals with disabilities and their families may choose to have both an ABLE account and a trust.

Note: When you die, after all qualified disability-related expenses are paid, any money left in your ABLE account may be used to pay back the Medicaid program for any benefits you got after you opened your account. If that could be an issue for your family, look into a third-party Special Needs Trust. Learn more about a Special Needs Trust.

ABLE account updates for 2018 can help people who work

Some ABLE rules changed on January 1, 2018:

  • If you have an ABLE account and you work, you can put up to an extra $12,060 of your earnings into your account (on top of the regular $15,000 that is allowed). The $12,060 must be from your own earnings – it cannot be contributions from others or money you get from benefits or other unearned income.
    • Note: This means that if you earn $12,060 or more, you could have a total of up to $27,060 go into your ABLE account in a year. If you earn less than $12,060, the amount you could contribute would be lower.
  • If you work and save money in an ABLE account, you may qualify for the Saver’s Credit when you file your federal taxes.
  • Money can be rolled over tax-free from a regular 529 college savings plan to an ABLE account. This means that money which hasn’t been or won’t be used for college can instead be used for expenses that are approved for usage from an ABLE account.
  • If you have an account, you have to make sure that too much money isn’t contributed into your account (even if it is other people making the deposits). Check with your ABLE program if you have questions about this.

This article has been updated to reflect these changes.