What are ABLE Accounts and How Do They Work?

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What are ABLE Accounts?

ABLE Accounts are tax-advantaged savings accounts available to individuals with disabilities and their families. With the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, ABLE accounts were created. The account owner is the beneficiary, and income earned by the account will not be taxed.

Any person – the account beneficiary, family, friends, Special Needs Trust, or Pooled Trust – can contribute funds to the account using post-taxed dollars. These contributions are not tax-deductible for federal tax purposes, but some states may allow for state income tax deductions.

How ABLE Accounts Can Help

According to the National Resource Center, the ABLE Act recognizes the additional and significant costs of living with a disability, and provides a savings tool to address it. Eligibility for public benefits that provide income, health care, food, and housing costs require a resource test. This test restricts eligibility to individuals with less than $2,000 in liquid resources, such as cash or non-ABLE savings and checking accounts. ABLE accounts can help with costs associated with:

  • raising a child with significant disabilities or a working-age adult with disabilities
  • accessible housing and transportation
  • education
  • personal assistance and support services
  • assistive technology
  • health care not covered by insurance, Medicaid, or Medicare
  • employment training and support
  • financial management and administrative services
  • other expenses to assist in improving health, independence, and quality of life

ABLE savings accounts do not typically interfere with eligibility for SSI, Medicaid and means-tested programs such as FAFSA, HUD and SNAP/food stamp benefits.

ABLE Account Savings Limits and Eligibility

The ABLE Act allows one account per eligible individual. In a single tax year, the total annual contributions from all participating individuals is $16,000. To keep up with inflation, the amount may be adjusted periodically. The annual exclusion for gifts in 2022 is $16,000, according to the IRS. This is the maximum amount an individual can gift to someone else and not need to report it to the IRS.

For eligibility, the ABLE Act limits eligibility to individuals with disabilities with an age of onset of disability before turning 26 years of age. According to the National Resource Center, if you meet this age requirement and are also receiving benefits under SSI and/or SSDI, you’re automatically eligible to establish an ABLE account.

How to Open an ABLE Savings Account

When deciding to open an ABLE savings account, consider these questions:

  • Is there a minimum contribution to open the account?
  • What documentation is required?
  • Are there investment opportunities your state’s ABLE program offers?

In the state of Missouri, eligible individuals can visit moable.com to view program details and open the account online.

Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither LPL Financial, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.