The benefits of an ABLE account for your child with special needs

To secure the best future possible for your child with special needs, you’ll likely want to explore the savings avenues available to you and your family. ABLE accounts offer tools to protect your child with private savings without jeopardizing government benefits.

What are ABLE accounts — and how can it help me?

Born from the Achieving a Better Life Experience Act of 2014 — better known as the ABLE Act, an ABLE account is a state-run savings program that can help those with special needs save for the future.

The beneficiary owns the account, and anybody interested in supporting the beneficiary can deposit post-tax dollars whenever they wish. Funds from the account can be used toward any qualified disability expense — generally, any service that improves the beneficiary’s health, independence or quality of life, including:

• Housing
• Transportation
• Assistive devices and technology
• Health care
• Education, tutoring and employment training
• Legal and administrative fees

Funds in an ABLE account are exempt from the $2,000 Supplemental Security Income (SSI), housing aid and Medicaid asset limit, as well as exempt from federal income tax.

Where can I sign up for an ABLE account?

ABLE accounts are available in 34 states. But thanks to 2015 update to the ABLE Act, you can apply for an account in any state that offers them, regardless of your state of residence.

Not all states that offer the ABLE program accept out-of-state applicants, but many do — including Colorado, Illinois, Montana, Ohio and Virginia.

How do I know if my child is eligible for an ABLE account?

To be eligible for an ABLE account, your child must:

• Have experienced the onset of your disability before age 26.
• Meet Social Security’s definition of what qualifies as a significant functional limitation.
• Provide a letter of certification from a licensed physician.

If your child receives SSI or Social Security Disability Insurance (SSDI) and meets the age criteria, they are eligible to register for an ABLE account.

Does my child’s disability qualify?

To be eligible for an ABLE account, your child must meet Social Security’s definition of what qualifies as a significant functional limitation.

According to the SSA, a significant functional limitation is any condition severe enough to substantially interfere with daily living.

For adults, this is measured as the inability to regularly engage in work or financially support themselves. For a child, this is measured as the inability to engage in age-appropriate activities.

If your child is not already receiving SSI or SSDI benefits, they could still qualify for an ABLE account if a letter of certification is submitted by your family physician confirming that they have a physical, cognitive or behavioral disability that prevents them from engaging in age-appropriate activities.

What tax benefits come with an ABLE account?

ABLE accounts allow loved ones to set aside up to $15,000 a year in post-tax contributions for the benefit of the account owner. That cap is expected to adjust in the future to account for inflation.

All money in the account remains exempt from taxation as long as it’s used for qualified disability expenses. Withdrawals for any other purpose are subject to pay some form of income tax and a 10% tax penalty.

The total amount over time that can be contributed to an ABLE account is subject to individual state law, but most states set this limit at $300,000 or more.

Note that contributions to an ABLE account are not tax-deductible for the purposes of federal taxes, though some states allow for state tax deductions on contributions.

Will having an ABLE account jeopardize my SSI benefits?

It could. The first $100,000 deposited into an ABLE account is exempt from the SSI $2,000 individual income limit. However, if your ABLE account exceeds a balance of $100,000, your SSI benefits could be suspended until the account balance falls back below this limit.

What states have ABLE accounts?

ABLE accounts are state-run programs, so availability, fees and contribution limits vary by state. For example, some states let anyone in the US open an account, while others only allow residents who live in that state to participate. Use the table to view ABLE limits by state.

	Available to out-of-state residents?	State income tax deduction for contributions per year?	Minimum contribution required to open account	Account limit	Annual fees
Alabama	Yes	No	$50	$350,000	$45
Alaska	Yes	No	$25	$400,000	$40
Arizona	No	No	$50	$431,000	$42
Colorado	Yes	No	$25	$350,000	$45
District of Columbia	Yes	No	$25	$500,000	$60
Florida	No	No	$0	$418,000	$0
Georgia	No	No	$50	$462,000	$42
Illinois	Yes	No	$25	$350,000	$45
Indiana	Yes	No	$25	$450,000	$45
Iowa	Yes	Yes – up to $3,128 of contributions	$25	$420,000	$45
Kansas	Yes	No	$25	$365,000	$45 for out-of-state account holders; $40 for in-state account holders
Kentucky	No	No	$50	$462,000	$42
Louisiana	No	No	$10	$500,000	$0
Maryland	Yes	Yes — up to $2,500 of contributions	$25	$350,000	$35
Massachusetts	Yes	No	$50	$400,000	$30
Michigan	Yes	Yes — $5,000 for single filers	$25	$500,000	$45
Minnesota	Yes	No	$25	$350,000	$45 for out-of-state account holders; $40 for in-state account holders
Mississippi	Yes	Yes — 100% of contributions	$25	$235,000	$60 for paper statement delivery; $45 for e-statements
Missouri	No	Yes — $8,000 for single filers and $16,000 for joint filers	$50	$445,000	$42
Montana	Yes	Yes, $3,000	$25	$400,000	$45
Nebraska	Yes	Yes, $5,000 for single filers; $10,000 for joint filers	$50	$360,000	$45
Nevada	Yes	No	$25	$370,000	$45
New Hampshire	No	No	$50	$462,000	$42 for out-of-state account holders; $30 for in-state account holders
New Mexico	No	No	$50	$462,000	$42
New York	No	No	$25	$100,000	$45
North Carolina	Yes	No	$25	$420,000	$45
Ohio	Yes	Yes — up to $2,000 of contributions	$50	$462,000	$42 for out- of-state account holders; $30 for in-state
Oregon	Yes	Yes, but limited to beneficiaries up to age 21 — $2,330 for single filers and $4,660 for joint filers	$0	$310,000	$45 for Oregon ABLE Savings Plan; $35 for ABLE for ALL Savings Plan
Pennsylvania	Yes	No	$25	$511,758	$45
Rhode Island	Yes	No	$25	$395,000	$40
South Carolina	No	Yes — 100% of contributions	$50	$426,000	$42
Tennessee	No	No	$25	$350,000	$0
Vermont	No	No	$50	$462,000	$42
Virginia	Yes	Yes — up to $2,000 of contributions	$0	$500,000	$39 — but waived if the account’s average daily balance is $10,000
Washington	Yes	No	$0	$86,000	$35
West Virginia	No	No	$50	$462,000	$42
Wyoming	No	No	$50	$462,000	$42

The ABLE savings account program is signed into law and in development in Arkansas, California, Connecticut, Delaware, Hawaii, Maine, New Jersey, North Dakota, Oklahoma, South Dakota, Texas, Utah, and Wisconsin.

Idaho doesn’t offer ABLE savings account programs as of June 2020.

How do I choose which ABLE account program is right for me?

Consider these factors when shopping around for ABLE accounts:

• Eligibility requirements. To qualify for an ABLE account, an individual must have developed their disability before age 26. They’re not required to have SSI to qualify, but they may have to get a disability certification from a doctor if they don’t receive SSI.
• Programs in your state. Some state governments only allow in-state residents to open an ABLE account, while others let anyone in the US participate in their plan. If your state doesn’t offer an ABLE account, use the chart in this article to find a state that allows out-of-state residents to participate.
• Annual fees. Some ABLE accounts are more expensive than others. Compare fees for annual or quarterly account maintenance, rollovers and investments to see which plan keeps more money in your pocket.
• Account limits. Maximum account balances vary by state, but they’re usually anywhere from $86,000 to $500,000. If you’re not trying to stick to the $100,000 maximum account balance needed for SSI eligibility, then take a second look at maximum account balances to find a plan that fits your needs.
• Tax advantages. Several states offer tax deductions and credits for contributing to an ABLE account. Explore the deductions and credits in your state to see what you may qualify for.

What are the pros and cons of ABLE accounts?

ABLE accounts give a person with disabilities more control over their account than a special needs trust. This can be a good thing if they want to access funds on their own to pay bills and cover expenses. But there’s also a higher chance that the individual could be taken advantage of if they’re not careful. Here are some other pros and cons:

Bottom line

While ABLE accounts are not yet available in all states, many states that do offer these savings accounts accept out-of-state residents. Most ABLE accounts require a $25 to $50 opening deposit and come with an annual fee of $35 to $60.

A strong draw to state-run ABLE accounts is the associated tax breaks. But be aware of the annual and lifetime limits that govern contributions made to these accounts.

Frequently asked questions

These are some of the most frequently asked questions about this topic. If you still have questions, please get in touch with us.

• Can I open more than one ABLE account?

  No. The ABLE Act limits the availability of ABLE accounts to one account per eligible individual.

• Does my child need to be under the age of 26 to open an ABLE account?

  No. An eligible ABLE account holder can be over the age of 26 when opening an account as long as they were diagnosed with their disability before the age of 26.

• Who can deposit funds into an ABLE account?

  Any person who wishes to support the beneficiary — including family members, friends and the account holder themselves — can deposit post-tax money into an ABLE account.