ABLE Accounts for the Disability Community

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In honor of Autism Acceptance Month, Femme Frugality will be hosting a series of Monday articles that focus on the financial challenges and triumphs that autistic people face and achieve. When they are children, these things also tend to affect their family’s finances, as well.

Pinning this for my sister who has an autistic daughter! Will help them actually be able to save money because they can't right now because of state asset tests. So messed up.

If you are on the autism spectrum, or your child is on the spectrum, it’s likely that you incur some costs that neurotypical people simply don’t. There may be therapies, adaptive equipment, nutritional supplements or even legal fees related to autism that end up in your budget.

Fortunately, in recent years these financial burdens have been acknowledged. With the passage of the ABLE Act, people with qualified disabilities — or their guardians — now have the ability to open an account built specifically to deal with these added expenses.

I was psyched when an advisor let me know Pennsylvania was rolling out theirs a few years ago. Since PA is the state I’m most familiar with, the PA ABLE account will be the one we dissect today, but other states have similar options. You can view them at the end of this article.

What is an ABLE account?

An ABLE account is a tax-advantaged investment account. It serves as a way for those with disabilities to save for expenses related to them as an entire human being.

Families are also able to save for their minor children in this way, or through a power of attorney if their child is an adult in need of assistance.

ABLE accounts are 529 accounts. If you’re familiar with these accounts for college savings, it’s a very similar thing except the scope of qualified expenses extends beyond just post-secondary education.

ABLE accounts are also advantageous because they don’t count against many state or federal programs that require asset tests, allowing the disability community to save for future costs without worrying about losing their healthcare or other necessities.

How do you qualify for an ABLE account?

Pennsylvanians have likely gone through the rigamarole of applying for SSI so you can get on Medicaid.

If your income is low enough, you get SSI payments.

If it’s too high, you don’t get the SSI payments. But SSI confirms you have a disability so you can get state-sponsored insurance.

Either way, if SSI certifies your disability, you qualify for an ABLE account.

Other ways you can qualify are through entitlement to SSDI or a signed confirmation of disability from a physician. They must also certify that you were disabled before age 26.

Invest in an ABLE account for your child's autism expenses and watch your savings grow tax-free.

What is a qualified expense for an ABLE account?

In Pennsylvania, qualified expenses are any expense related to the disability. That includes:

  • Tuition for school–Pre-K through post-secondary
  • Books and other supplies related to education
  • Mass transit expenses
  • Purchase of a vehicle
  • Modification of a vehicle
  • Moving expenses
  • Job training
  • Expenses related to gaining/maintaining employment
  • Health expenses across the realms of mental, physical, vision and dental
  • Health insurance premiums
  • Durable medical equipment
  • Respite care
  • Therapies
  • Communication services/devices
  • Personal assistance
  • Nutrition management
  • Financial management
  • Legal fees
  • Funeral and burial expenses

In addition, you can use it for these housing-related expenses tax free, though withdrawing money for any of the below may impact your SSI benefits:

  • Primary residence expenses
  • Rent
  • Mortgage payments
  • Property taxes
  • Home improvements or modifications
  • Utilities

This is by no means an exhaustive list. You can use the money for anything related to the associated disability. Medical necessity isn’t necessarily a requirement. It just must improve the disabled person’s life.

Just remember to keep good documentation about what you’ve spent the money on. If the IRS ever audits you, they’re going to want to see receipts.

Check out other qualified expenses under PA ABLE.

How much can I save in an ABLE account?

You can save $15,000 per year.

If you have family or friends that want to contribute, their generosity counts towards that $15,000.

Through the end of 2025, disabled adults who are employed can save money above and beyond the $15,000 limit through the ABLE to Work Act.

The max amount you can have in an ABLE account at any given time is $511,758 in the state of Pennsylvania. This max number will vary from state to state.

If you are a parent or guardian who is saving for a child, once you reach this point you may want to talk to a professional about a trust or even a special needs trust.

What are the tax advantages of saving in an ABLE account?

You contribute money to an ABLE account after you’ve already paid taxes, so contributions won’t lower your AGI on your taxes.

However, the money is allowed to grow tax-free. As long as your withdrawals are made for qualified expenses, you won’t have to pay taxes when you take the money out.

If you spend the money on an unqualified expense, though, you will be hit with a penalty.

Under ABLE to Work, you can also apply your ABLE contributions to the federal Savers Credit through 2025.

You don’t necessarily have to live in a state to purchase its plan. For example, PA ABLE is available to people in all 50 states — not just Pennsylvania.

On this particular plan, you might end up paying state taxes on your gains if you’re from out of state. Pennsylvania residents are exempt, and also won’t pay state taxes upon a qualified withdrawal.

Pennsylvania residents also benefit from exemption from the PA inheritance tax. Check with your state to see what benefits may be available.

Stop worry about asset tests and start building savings with an ABLE account.

Will an ABLE account mess up my state or federal benefits?

Money in ABLE accounts is safe from means-based tests on federally-distributed benefits, save for SSI.

Typically, SSI limits your assets to $2,000, but ABLE accounts are a little different. They won’t count the first $100,000 in your ABLE account against you for SSI qualification or the determination of your dollar-amount benefits.

Savings also can’t count against your SNAP eligibility per the USDA’s issued guidelines.

Separately, the state of Pennsylvania has passed legislation that prohibits your ABLE balance from being used in any asset tests related to health or disability.

What about financial aid for college?

In the state of Pennsylvania, PA ABLE savings will not count on applications for state-based financial aid.

ABLE accounts are not supposed to count towards federal means-based tests. One would assume these savings should not be included on the FAFSA.

However, as far as can be told the US Department of Education has not issued any guidance on this to date. You may want to call the Federal Student Aid Information Center to get the most up-to-date information.

Do not count ABLE savings on other children’s FAFSA applications.

What are the fees?

You can avoid all administrative fees by getting your documents delivered electronically. Investment fees are between 0.34% and 0.38% depending on which option you pick.

Picking an option–from conservative to agressive–is something we’ll be tackling in a future post. Saving for college with a 529 is one thing, but saving for expenses related to autism that come up as a part of your daily life is quite another all together.

Rent isn’t something you’ll be paying in 30 years–it’s something that’s due now. If you need an iPad to communicate,  you’re not going to wait for 15 years of appreciation on your investment before you start to exchange information with the world.

But that isn’t to say the most conservative option is the best choice each and every time. It’s complex, and something we brought an expert in to cover.

functional fashion modern frugal mom

Are ABLE accounts worth it?

While the fees may not be the lowest, the account is tax-advantaged and allows you to use your money before retirement age.

It also allows you to save for future expenses without disqualifying yourself from certain federal and state means-tested benefits.

If you’re a parent, you may not be sure if your child will go to college or not. An ABLE account gives them the flexibility to pursue whatever occupational or educational path should they come to a fork in the road.

Or, if you come up against a financial emergency between now and then because of your child’s medical, communication or educational needs, you have the money there to save you from financial distress while still providing the best for your kid.

Overall, it’s a much-needed solution that many individuals and families will be able to use to their advantage. With so many frustrating lines of red tape around every corner, it’s good to see that this issue is getting some recognition and legislation.

Other states with ABLE accounts

Not all state plans are created equally.

Don’t pick a plan simply because it is based in your state or think that because your state doesn’t offer a plan, you’re not eligible.

Fees, residency requirements and state tax advantages are all going to vary. Do further research before opening any financial account.

14 thoughts on “ABLE Accounts for the Disability Community

    1. Femme Frugality

      Definitely! Since Delaware doesn’t offer one yet, I’m not sure about the state benefit/tax advantages. They may exist—it would just require further research. But at the Federal level they exist regardless.
      I’ll have an expert talking about how much risk to take on with these investments in the next couple of weeks. It will be on a Monday.

      Reply
    1. Femme Frugality

      Agreed. It’s not so much that life is any better or worse—more so the systems we have in place. Asset tests are one of the most counter productive and frustrating systems.

      Reply
    1. Femme Frugality

      It can be a really cool financial tool–and they’re pretty new, too! Pennsylvania’s just opened up in the last six ish months, and more states are hopefully on their way.

      Reply
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  3. Done by Forty

    “With the new tax law, you will be able to apply your ABLE contributions to the federal Savers Credit.”

    This sounds like the sweet spot, for me.

    I’d personally be a little hesitant to put too much money in this account or a 529, due to the strings on what you can do with the money, and the limited benefit you get from avoiding taxes growth on what (hopefully) are tax efficient investments. (Man, I’m a curmudgeon today.)

    But at least up to the point that you could maximize the federal Savers Credit seems like a great option.

    Reply
    1. femmefrugality Post author

      Yes, that is a nice benefit, and I hope it continues past the expiration of the personal tax breaks in a few years.

      However, I have to disagree with the rest. If you have the option of investing in one of those other vehicles without screwing yourself over on an asset test, that’s awesome. But many disabled people don’t.

      Many disabled people don’t have the option of building a basic savings account without losing benefits that help keep them afloat, which is another big problem this solves.

      And as far as 529s and expenses, I agree when they’re educational in most situations. But the qualified expenses are so vast on ABLE 529s that I think it would be relatively difficult to incur a tax penalty.

      Reply
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