ABLE Accounts Tax Advantages And You May Not Even Know You Are Eligible

Christopher P. Stenmon Principal, CPA, MST

17 June 2019



The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act was signed into law by President Obama in December 2014. It amends the federal tax code and adds Section 529A. Some consider this to be the most significant federal legislation for disabled individuals since President George H. W. Bush signed the Americans with Disabilities Act (ADA) into law in 1990. The ABLE Act was much less notorious
than the ADA Act, so you are not alone if you have never heard of it. You or someone you know may even be eligible!

What are ABLE Accounts?

ABLE accounts are tax advantage savings accounts for eligible individuals.  The ABLE Act recognizes the additional and significant costs of living with a disability.  Being a disabled person myself, I can attest to these costs, such as durable medical equipment, the purchase and modification of a vehicle, assistive technology, personal assistance services, nutrition management, and other therapies and medical services.  Many of these costs have fewer vendors, making the concept of supply and demand very difficult for the disabled individual or his or her family.  According to the Social Security Program Operations Manual System, (POMS), an ABLE program can be established by a State (or State agency or instrumentality of a State.) An eligible individual can open an ABLE account through the ABLE program in any State, as long as the State permits it.

How Much Can I Contribute?

The total annual contributions by all participating “contributors” (includes family and friends) for each tax year is $15,000. This amount is analogous to the maximum amount that individuals can make as a gift to someone else without reporting that gift to the IRS. (annual gift tax exclusion).  In addition, ABLE account owners who work may contribute up to an additional $12,140 (for the 2019 year) of their gross income into their ABLE account if they do not have an employee-sponsored retirement plan.

Are You Eligible?

To be eligible, individuals must meet two requirements:

1) Age requirement: must be disabled before age 26;
2) Severity of disability:

• Have been determined to meet the disability requirements for Supplemental Security Income (SSI) or Social Security disability benefits (Title XVI or Title II of the Social Security Act) and are receiving those benefits,
• Submit a “disability certification” assuring that the individual holds documentation of a physician’s diagnosis and signature and confirming that the individual meets the functional disability criteria in the ABLE Act (related to the severity of disability described in Title XVI or Title II of the Social Security Act).

Therefore, if you meet the age criteria and are also receiving benefits under SSI and/or SSDI, you are automatically eligible to establish an ABLE account. If you are not a recipient of SSI and/ or SSDI, but still meet the age criteria, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician.

A disability certification with respect to an individual is a certification signed under penalties of perjury by the individual establishing (or with signature 4 authority over) the ABLE account for the individual, that—

(i) The individual—

(A) Has a medically determinable physical or mental impairment
that results in marked and severe functional limitations
and that—

(1) Can be expected to result in death; or

(2) Has lasted or can be expected to last for a continuous period of not less than 12 months; or

(B) Is blind (within the meaning of section 1614(a)(2) of the Social Security Act);

(ii) Such blindness or disability occurred before the date on which the individual attained age 26 (and, for this purpose, an individual is deemed to attain age 26 on his or her 26th birthday); and

(iii) Includes a copy of the individual’s diagnosis relating to the individual’s relevant impairment or impairments, signed by a physician.  Conditions listed in the “List of Compassionate Allowances Conditions” maintained by the Social Security Administration at ( are deemed to meet the requirements regarding the filing of a disability certification if the condition was present before the date on which the individual attained age 26. To establish that an individual with such a condition meets the definition of an eligible individual, the individual must identify the condition and certify to the qualified ABLE program both the presence of the condition and its onset prior to age 26, in a manner specified by the qualified ABLE program.

Which Expenses Are Allowed by ABLE Accounts?

A “qualified disability expense” means any expense related to the designated beneficiary as a result of living a life with disabilities.

According to IRS Code Section 529A(e)(5), The term “qualified disability expenses” means any expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations and consistent with the purposes of this section.  These expenses noted above help to improve health, independence, and quality of life.  You can use the money in the account for anything related to the associated disability, and there is no requirement for it to be deemed medically necessary.  However, I recommend you keep good documentation about what you have spent the money on.  You will want to keep receipts should the IRS decide to audit you.

Potential Changes to ABLE Accounts

There are currently bills in the Senate (S.817) and House of Representatives (H.R. 1874) which would amend the Internal Revenue Code to increase the age requirement for qualified ABLE programs from 26 to 46.  Both bills have the exact same language and would be effective for tax years beginning after the date of the enactment of this Act.  Stay tuned, but given the stalemate going on in Washington, this may be a while.

What’s Next?

If you believe you qualify to open an ABLE account, I recommend you do your research of which State program would be best for you. There are over 40 states that have established ABLE programs.  Being a Massachusetts resident, I chose the program in my home state. Massachusetts Educational Financing Authority (MEFA) serves as the sponsor of the ABLE savings’ plans and Fidelity Investments manages

Personally, I have benefited from the ABLE account I have by not having to pay income taxes on any of the earnings. During the past few years, the stock market has been up significantly, so this additional cash flow from not paying taxes can be used for the additional durable medical costs  I have incurred over the years.

My ABLE account has been beneficial for me; however, all individuals have different facts and circumstances. I recommend you consult your tax and/or financial advisor. If you prefer to contact me, I can be reached at 617-471-1120 or