Key Takeaways
- ABLE accounts let you save and invest tax-free for disability-related expenses.
- Up to $100,000 in an ABLE account is excluded from Supplemental Security Income (SSI) resource limits, and Medicaid eligibility continues beyond that.
- Withdrawals are tax-free if used for qualified disability expenses: housing, medical care, education, assistive technology, etc.
- Beginning in 2026, the age of disability onset for eligibility will rise from before age 26 to before age 46.
If you or a loved one lives with a disability, you already know the costs aren’t just medical.
Specialized equipment, home modifications, transportation, personal support services, ongoing therapies… they all add up (often far exceeding what a “normal” household budget can handle).
That’s why Congress passed the Achieving a Better Life Experience (ABLE) Act.
It’s a practical tool for individuals with disabilities and their families to build financial independence while protecting means-tested benefits.
And starting January 1, 2026, the eligibility age will expand from before age 26 to before age 46. Which means, if you’re a parent or caregiver, this is the time to get documentation organized.
What is an ABLE Account?
An ABLE account is one of the most valuable financial planning tools for Milwaukee people with disabilities, for a few reasons.
First, money in the account grows tax-free. And when you spend it on qualified disability expenses (which I’ll define in a moment), both principal and earnings remain tax-free. That is, as long as the total contributions from all sources don’t exceed the federal gift tax exclusion of $19,000 for 2025.
And if the beneficiary works and doesn’t participate in an employer-sponsored retirement plan, they can add even more from their own earnings — up to the federal poverty level.
Normally, having more than $2,000 in assets can jeopardize your SSI eligibility. But with an ABLE account, the first $100,000 is ignored for SSI resource purposes.
And Medicaid continues no matter how large the account grows (up to your state’s limit). But when the beneficiary dies, the state may take any remaining ABLE funds to recover the cost of Medicaid services they received after the account was opened (AKA, the Medicaid payback provision).
What are qualified disability expenses?
The IRS defines qualified disability expenses as those related to the beneficiary’s disability that help maintain or improve health, independence, or quality of life.
The standard is whether the expense is for the benefit of the person with the disability, not just medical necessity. Qualified disability expenses include:
- Housing and utilities: like rent, mortgage payments, property taxes, electricity, gas, water, sewer, and garbage. (But if you withdraw ABLE funds for housing, spend them in the same month. Unspent funds can count as a resource the next month, which could reduce your SSI payment.)
- Assistive technology and personal support: think wheelchairs, hearing aids, home automation systems, vehicle modifications, communication devices, etc. This category also includes personal attendants, home health aides, and job coaches.
- Health and wellness: Beyond doctor visits, this includes everything from insurance premiums and co-pays to physical therapy, mental health counseling, respite care, and specialized diets.
- Education and employment: Tuition, books, tutoring, vocational training, job placement support, business start-up costs, even service animal care.
- Financial and legal needs: Tax prep or financial advisor fees, legal costs for establishing an ABLE account or a Special Needs Trust, funeral and burial expenses, even groceries and daily living costs may qualify if they benefit the disabled individual.
Just make sure to keep records, because the IRS can ask for them. Keep invoices, bank statements, and receipts. If you can’t prove it was a qualified disability expense, earnings may become taxable (and hit with a 20% penalty).
FAQs
“Who can open an ABLE account?”
The account must be established for someone whose disability began before age 26 (expanding to 46 in 2026). The individual can open it themselves, or a parent, guardian, or power of attorney can open it on their behalf.
“Can I have both an ABLE account and a Special Needs Trust (SNT)?”
Yes, and many families use both. The ABLE account offers tax-free growth and direct spending flexibility, while the SNT handles larger assets without triggering payback provisions the same way.
“Do ABLE contributions count as income?”
No. Contributions to an ABLE account are treated as gifts and don’t count toward the beneficiary’s income for SSI or tax purposes.
“Can I use ABLE funds to buy a car or home?”
Yes, if the purchase relates to the disability and improves independence or quality of life. These are considered qualified disability expenses. Just make sure you document the intent clearly.
“What happens if I spend ABLE funds on a non-qualified expense?”
Earnings on that withdrawal become taxable, plus a 20% penalty. Also, the amount may count as income for SSI purposes.
“Is there a limit to how much an ABLE account can hold?”
Each state sets its own maximum (usually mirroring 529 plan limits). Remember: only the first $100,000 is excluded from SSI resource calculations.
“Can others contribute to my ABLE account?”
Absolutely. Family members, friends, and even employers can contribute within the annual limit. Some states also offer tax deductions for residents contributing to their own ABLE program.
Is an ABLE account right for you?
If you’re considering an ABLE account, it’s not something to navigate without guidance. Because these accounts sit right at the intersection of tax law and means-tested benefits, even a small mistake can trigger tax penalties or suspend SSI or Medicaid.
My role as your trusted Southeastern Wisconsin tax pro is to help you structure your account correctly, ensuring that: housing withdrawals follow strict timing rules, every qualified disability expense is properly documented, and your ABLE plan fits into your larger tax strategy.
So, let’s have a conversation about whether an ABLE account is the right move for you and your family: