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

Discover the savings potential of these tax-advantaged accounts.

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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.

Setting aside money for your child once meant setting up a special-needs trust, allowing you to provide for their care far into the future without jeopardizing government benefits.

But since 2014, newly designed ABLE accounts have offered another tool for protecting your child with private savings without affecting their valuable public assistance.

What is an ABLE account — 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.

ABLE account comparison by state

Available to out-of-state residents?State income tax deduction for contributions per year?Minimum contribution required to open accountAccount limitAnnual fees
AlabamaYesNo$50$350,000$45
AlaskaYesNo$25$400,000$40
ArizonaNoNo$50$431,000$42
ColoradoYesNo$25$350,000$45
District of ColumbiaYesNo$25$500,000$60
FloridaNoNo$0$418,000$0
GeorgiaNoNo$50$462,000$42
IllinoisYesNo$25$350,000$45
IndianaYesNo$25$450,000$45
IowaYesYes – up to $3,128 of contributions$25$420,000$45
KansasYesNo$25$365,000$45 for out-of-state account holders; $40 for in-state account holders
KentuckyNoNo$50$462,000$42
LouisianaNoNo$10$500,000$0
MarylandYesYes — up to $2,500 of contributions$25$350,000$35
Massachusetts YesNo$50$400,000$30
MichiganYesYes — $5,000 for single filers$25$500,000$45
MinnesotaYesNo$25$350,000$45 for out-of-state account holders; $40 for in-state account holders
MissouriNoYes — $8,000 for single filers and $16,000 for joint filers$50$445,000$42
MontanaYesYes, $3,000$25$400,000$45
NebraskaYesYes, $5,000 for single filers; $10,000 for joint filers$50$360,000$45
NevadaYesNo$25$370,000$45
New HampshireNoNo$50$462,000$42 for out-of-state account holders; $30 for in-state account holders
New MexicoNoNo$50$462,000$42
New YorkNoNo$25$100,000$45
North CarolinaYesNo$25$420,000$45
OhioYesYes — up to $2,000 of contributions$50$462,000$42 for out- of-state account holders; $30 for in-state
OregonYesYes, 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
PennsylvaniaYesNo$25$511,758$45
Rhode IslandYesNo$25$395,000$40
South CarolinaNoYes — 100% of contributions$50$426,000$42
TennesseeNoNo$25$350,000$0
VermontNoNo$50$462,000$42
VirginiaYesYes — up to $2,000 of contributions$0$500,000$39 — but waived if the account’s average daily balance is $10,000
WashingtonYesNo$0$86,000$35
West VirginiaNoNo$50$462,000$42
WyomingNoNo$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 and Mississippi do not offer ABLE savings account programs at the time of this writing.

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 the state-run ABLE accounts are 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.

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