What Is an ABLE Account?

mariadrg2021
Oct 9
4 min read

An ABLE Account (Achieving a Better Life Experience) is a special type of savings account created by U.S. law to help individuals with qualifying disabilities save money without losing access to important public benefits like Medicaid or Supplemental Security Income (SSI).(ABLE National Resource Center – ABLE Basics 2025)

The main purpose of ABLE accounts is to provide financial independence for people with disabilities and their families while preserving eligibility for federal assistance programs.

Key highlights:

Funds in an ABLE account grow tax-free if used for qualified disability expenses.
Eligible expenses include education, housing, transportation, healthcare, employment support, assistive technology, and personal assistance.
Contributions can come from the beneficiary, family members, friends, or organizations, as long as the total remains within the annual contribution limit.

Who Qualifies for an ABLE Account?

To open an ABLE account, an individual must meet the following criteria:

The person must have a qualifying disability as defined under Social Security or IRS rules.
The disability must have begun before the age of 26 (this threshold will increase in 2026).
There is no upper age limit to maintain an account once it has been established.(Social Security Administration Blog)

2026 Update: Expanded Eligibility

Starting January 1, 2026, the ABLE Age Adjustment Act will expand eligibility — allowing individuals whose disability began before age 46 to open an ABLE account.This expansion is expected to make millions of additional Americans eligible.(ABLE National Resource Center – Summer 2025 Newsletter)

Contribution Limits and the “ABLE to Work” Rule

Annual Contribution Limit

For 2025, the total annual contribution limit is $19,000.This limit matches the federal annual gift tax exclusion.(IRS – Tax Benefits for Persons with Disabilities)
In 2024, the limit was $18,000 — so it has increased slightly to adjust for inflation.(Disability Scoop, Jan 2025)
Contributions from all sources (the individual, family, friends, or trusts) count toward the annual cap.

ABLE to Work Exception

Working beneficiaries who do not participate in an employer-sponsored retirement plan may contribute more than the standard limit under the ABLE to Work Act.(ABLE National Resource Center – ABLE to Work Act)

In 2025, the additional contribution amount is the lesser of:a) the beneficiary’s gross annual income, orb) the federal poverty line for a one-person household (around $15,000–$16,000, depending on the state).
This means a qualifying worker could save up to $34,060 in 2025.
The ABLE to Work provision is currently scheduled to expire at the end of 2025, though Congress may extend or make it permanent.(ABLE United Blog – ENABLE Act)

How ABLE Accounts Affect Public Benefits

A major benefit of ABLE accounts is that the funds (up to a certain limit) do not count as resources that might disqualify the beneficiary from SSI or Medicaid.(ABLE National Resource Center – Quick Reference 2025)

For SSI, the first $100,000 in an ABLE account is exempt from the $2,000 asset limit.If the account balance exceeds $100,000, SSI payments are temporarily suspended (but Medicaid continues).
Upon the beneficiary’s death, the state may recover from the ABLE account the cost of Medicaid benefits paid during the person’s lifetime — after final expenses are settled.(ABLE National Resource Center)

Qualified Disability Expenses (QDEs)

Withdrawals are tax-free when used for Qualified Disability Expenses (QDEs), which include:

Health and medical care
Education and job training
Housing and home modifications
Transportation and accessibility improvements
Personal support and caregiving
Assistive technology and adaptive equipment
Employment support services
Wellness and quality-of-life related expenses

If funds are used for non-qualified purposes, the earnings portion becomes taxable and may face a 10% penalty, plus potential effects on benefits eligibility.(Feldman Law Group – 2025 Update)

Key Benefits and Considerations

Benefits

Save for long-term disability needs without losing access to Medicaid or SSI.
Tax-free growth when funds are used for qualified expenses.
Anyone can contribute — family, friends, or the beneficiary.
Working beneficiaries can make extra contributions through ABLE to Work.
Encourages financial empowerment and independence for people with disabilities.

Considerations

SSI benefits are paused if total savings exceed $100,000, though Medicaid continues.
Some states may reclaim Medicaid costs upon the beneficiary’s death.
Contribution flexibility under ABLE to Work is temporary (expires end of 2025 unless extended).
Rules, fees, and contribution limits vary by state plan.
If the individual no longer qualifies as disabled, the tax advantages end that year.

Useful Resources

For more detailed information and tools to compare state plans:

ABLE National Resource Center (ABLE NRC) – Comprehensive ABLE guides and plan comparison tools
IRS – ABLE Accounts and Tax Benefits
ABLE United Blog – ENABLE Act
Social Security Administration – ABLE Age Adjustment Act
Disability Scoop News: 2025 Updates

Need help understanding how an ABLE account might affect your taxes or eligibility for benefits?

At MDR Tax Filing, we help families navigate the financial and tax implications of disability savings and other specialized programs — in English and Spanish.