Tax-free ABLE Accounts for Disabled Individuals: The Basics

The Achieving a Better Life Experience Act (ABLE) is gaining popularity as people recognize the ease in gaining eligibility and setting up an account. The Act was signed into law on December 19, 2014 to amend section 529 of the Internal Revenue Code. The ABLE Act assists individuals and families toward saving private funds to support individuals with disabilities in maintaining health, independence, and quality of life.

There are two ways in which an individual may become eligible for an ABLE account. First, if an individual is entitled to benefits based on blindness or disability under Title II or Title XVI of the Social Security Act, and such blindness or disability occurred before the individual attained 26 years of age, they are eligible to open an ABLE account. The second way to gain eligibility is to file a disability certification with the Secretary of the Treasury. The disability certification must state that an individual has a medically determinable physical or mental impairment which results in functional limitations, and the disability occurred before the individual attained 26 years of age.

ABLE accounts allow individuals to create a tax-free savings account which will have no effect on the individual’s or the family’s eligibility for Social Security Income, Medicaid, or other public benefits. ABLE accounts fund a variety of expenses, including education, housing, medical, dental and many other services. During a taxable year, an individual or other contributor is allowed to contribute up to $14,000 into an ABLE account, which allows an individual to remain eligible for Medicaid and Supplemental Security Income benefits, even though the $2,000 limit on personal assets may be exceeded. Over time, the limit for an ABLE account is determined on a state-by-state basis, and many states have set that limit around $300,000.

The Able Act, like section 529 college savings plans, provides a tax efficient mechanism to save money without a burdensome application process and should be explored by anyone with a disability.

Michael Salad is an associate in Cooper Levenson’s Business & Tax and Cyber Risk Management practice groups. He concentrates his practice on estate planning, business transactions, mergers and acquisitions, tax matters and cyber risk management. Michael holds an LL.M. in Estate Planning and Elder Law.

Michael is licensed to practice law in New Jersey, Florida and the District of Columbia. Michael may be reached at 609.572.7616 or via e-mail at

Bryan Sullivan is a summer Law Clerk at Cooper Levenson. He is a candidate for a J.D. at Rutgers School of Law in Camden. Bryan can be reached at 609.572.7508 or via e-mail at