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.
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
- 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
- Mortgage payments
- Property taxes
- Home improvements or modifications
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.
How much can I save in an ABLE account?
You can save $16,000 per year.
If you have family or friends that want to contribute, their generosity counts towards that $16,000.
Through the end of 2025, disabled adults who are employed can save money above and beyond the $16,000 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.
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 — up to a certain amount.
Typically, SSI limits your assets to $2,000. But 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. And a couple years ago, ED officially came out and said the money held in your ABLE account won’t count against you on your FAFSA.
Do not count ABLE savings on other children’s FAFSA applications, either.
What are the fees in Pennsylvania?
The account maintenance fee is $15 per quarter, but you can get it lowered to $11.25 per quarter if you opt for paperless statements.
If you go with the checking account option rather than investing your money, there’s a $2 fee every month that you can get down to $0 by enrolling in paperless statement
If you are using your ABLE Account as more than a checking account — or using it to invest–picking an option from conservative to aggressive is an important choice. Some expenses, like rent, are due today, so you don’t have a very long time horizon.
PRO TIP: If you live in Pennsylvania or Mississippi, you can make your rent and other housing expenses tax deductible with an ABLE account. Here’s how.
If you need an iPad to communicate and you don’t live in a state where AAC devices are covered by insurance, you’re probably going to be saving in terms of months rather than years.
But that isn’t to say the most conservative option is the best choice each and every time. It’s complex and nuanced So we brought in an expert to cover how to invest with an ABLE account.
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.
- Alabama: Enable Savings Plan Alabama
- Alaska: Alaska ABLE Plan
- Arizona: AZ ABLE
- Arkansas: Arkansas ABLE
- California: CalABLE
- Colorado: coloradoABLE
- Connecticut: ABLE CT
- Delaware: DEPENDABLE
- District of Columbia: DC ABLE
- Florida: ABLE United
- Georgia: Georgia STABLE
- Hawaii: Hawai’i ABLE Savings Program
- Illinois: Illinois ABLE
- Indiana: INvestABLE
- Iowa: IAble
- Kansas: Kansas ABLE Savings Plan
- Kentucky: STABLE Kentucky
- Louisiana: LA ABLE
- Maine: ABLE ME
- Maryland: MarylandABLE
- Massachusetts: The Attainable Savings Plan
- Michigan: MiABLE
- Minnesota: Minnesota ABLE Plan
- Mississippi: Mississippi ABLE
- Missouri: MO ABLE
- Montana: Montana ABLE
- Nebraska: Enable Savings Plan
- Nevada: ABLE Nevada
- New Hampshire: STABLE NH
- New Jersey: NJ ABLE
- New Mexico: ABLE New Mexico
- North Carolina: NC ABLE
- New York: NY ABLE
- Ohio: STABLE Account
- Oklahoma: Oklahoma STABLE
- Oregon: Oregon ABLE Savings Plan
- Rhode Island: RI’s ABLE
- South Carolina: Palmetto ABLE
- Tennessee: ABLE TN
- Texas: Texas ABLE
- Utah: ABLE Utah
- Vermont: STABLE Account
- Virginia: ABLEnow
- Washington: Washington State ABLE Savings Program
- West Virginia: WVABLE
- Wyoming: WYABLE