Try It
Why an ABLE Account?
There are two basic reasons for opening an ABLE account:
- To save money without worrying about the resource limits for Supplemental Security Income (SSI) and other benefits; and
- To take advantage of tax benefits.
Resource Limits
To get benefits from SSI, Medicaid, and many other programs, you must have limited assets (cash savings, retirement funds, etc.).
Some people avoid building assets and saving up money, because they are afraid they’ll lose their benefits. Now, people with disabilities and their families can save money in an ABLE savings account without affecting SSI, Medicaid, and other benefits, including:
- Medicare Savings Programs
- The Medicare Part D Extra Help/Low Income Subsidy (LIS)
- SNAP, and
- Kentucky Transitional Assistance Program (K-TAP).
The goal of an ABLE account is to give people with disabilities more independence and financial security.
If you have a job, you can save money in your ABLE account without any changes in your benefits. An ABLE account also lets family and friends give you money without affecting your benefits. And any interest or other growth in the account is tax-free, as long as you spend the money from your ABLE account on disability-related expenses.
Generally, if you get SSI benefits, the help you get to pay for food and shelter (housing) may cause you to get lower monthly benefits. For example, if you are single, the most you can usually get in SSI benefits is $943 per month, but if your parents are helping you with your rent and your food, your maximum SSI benefits might go down to $628.67. However, if your parents put money into your ABLE account, you can use the money from your ABLE account for food and shelter and your SSI benefits won’t be affected. That could make a big difference in your monthly benefits!
Note: If you want to use money from your ABLE account for housing-related expenses, make sure you take out and spend the money in the same month. Learn more about ABLE account spending rules.
Tax Benefits
ABLE accounts can have two tax benefits:
- The growth of your investments isn’t taxed, and
- If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit.
1. Untaxed Growth of Investments
ABLE programs typically offer multiple investment options, letting you choose from various mutual fund plans (which offer greater rewards but can go up or down, depending on the market), or savings accounts (which pay low interest, but are guaranteed by the federal government). You pay no income taxes on any growth in the value of your investments or any interest earned on your savings — so your wealth may grow faster.
However, any money taken out of an ABLE account must be spent on qualified disability-related expenses. If you take money out of your ABLE account and don’t spend it on qualified disability-related expenses, you may have to pay income tax plus a 10% penalty.
2. Saver’s Credit
If you work and save some of your earned income in an ABLE account, when you file your federal taxes you may get the Saver’s Credit (also called the Retirement Savings Contributions Credit). The Saver’s Credit cuts the amount you pay in taxes.
Deposits to an ABLE account will only qualify you for the Saver's Credit if you:
- Owe taxes
- Put money from your earned income into the ABLE account (money from other sources, like family or friends, doesn’t count for the Saver's Credit), and
- Are not also making contributions to a retirement plan. (Though you may separately qualify for the Saver’s Credit based on your retirement contributions.)
There are other requirements to get this credit. Learn more about the Saver’s Credit.
If you already have a Special Needs Trust, you may want to think about also opening an ABLE account.
An ABLE account:
- Is easier (and cheaper) to open and manage than a trust
- Provides tax benefits (as long as any money withdrawn is spent on qualified disability-related expenses)
- Gives you more control and more choices
- Lets you use the money for housing expenses without making your SSI benefits go down
However, there are limits on how much money can be deposited in an ABLE account each calendar year. If you get SSI benefits, your SSI stops any time you have more than $100,000 in the account. Plus, each state stops letting you deposit money into your ABLE account after your account balance goes over a certain level ($200,000 – $500,000 or more, depending on the state).
A Special Needs Trust:
- Has no limits on contributions
- Does not require that your disability began before you turned 26
- The money in a Special Needs Trust does not have to be spent on qualified disability expenses
Learn more about Special Needs Trusts.
The bottom line: Because there are limits on how much you can put into your ABLE account each year, you cannot replace a trust with an ABLE account. Instead, use them both as part of your overall financial strategy.
Learn more
Building Your Assets and Wealth
Discover ways to save up money while working.
Supplemental Security Income (SSI)
SSI helps people with disabilities and seniors who have low income and low resources.
How Health Benefits Work
Learn about the different ways you may be able to get health coverage.
Get Expert Help
SSI and SSDI
1-800-772-1213
How Work Affects SSI and SSDI:
- Contact a Work Incentives Planning and Assistance (WIPA) counselor
-
OVR clients: Contact the Office of Vocational Rehabilitation
1-800-372-7172 (V/TTY) -
Call the Ticket to Work Help Line
1-866-968-7842
Medicaid
- Contact your Department for Community Based Services (DCBS) office
-
Call Medicaid Member Services
1-800-635-2570
Medicare
-
Call Medicare
1-800-633-4227 -
Call the Kentucky State Health Insurance Assistance Program (SHIP)
1-877-293-7447
Work Preparation
-
Contact the Kentucky Office of Vocational Rehabilitation (OVR)
1-800-372-7172 (V/TTY) - Contact your Kentucky Career Center
Give Feedback