Disability Savings Plan: Eligibility, Contributions, and Tax Benefits

A disability savings plan, known formally as an ABLE account (Achieving a Better Life Experience), lets a person whose qualifying disability began before age 46 save and invest money without losing Supplemental Security Income, Medicaid, or other means-tested federal benefits. Created by the ABLE Act of 2014 and codified at Section 529A of the Internal Revenue Code, these accounts grow tax-free, allow up to $19,000 in contributions per year for 2026, and shield the first $100,000 in the account from SSI’s asset limit.

Who Qualifies

Eligibility turns on when the disability started, not on when you open the account. Starting January 1, 2026, the disability must have had its onset before the person turned 46. The prior cutoff was age 26, and the change comes from the ABLE Age Adjustment Act enacted as part of SECURE 2.0.¹

If you already receive SSI or Social Security Disability Insurance based on a disability that began before age 46, you’re automatically eligible and no additional documentation is required.²

If you don’t receive either benefit, you can still qualify with a disability certification signed by a licensed physician. The certification must state that you have a physical or mental impairment causing marked and severe functional limitations, and that the condition is expected to last at least 12 months or result in death. You keep the certification in your records rather than filing it with the account.³

Each eligible person can hold only one ABLE account at a time, though you can move it between state plans.

How Much You Can Contribute

The Annual Cap

The standard yearly contribution limit is tied to the federal gift tax exclusion, which is $19,000 for 2026.² That cap is combined across everyone who contributes. If a parent puts in $12,000 and a grandparent adds $7,000, the account is done for the year. Rollovers from a 529 college savings plan also count toward the annual cap.⁴

Extra Room if You Work

The ABLE to Work provision lets an employed beneficiary contribute above the standard limit, provided neither you nor your employer puts money into a workplace retirement plan such as a 401(k), 403(b), or 457(b) during the same calendar year. If you meet that condition, you can add an amount equal to your gross wages for the year or $15,650 (the federal poverty guideline for a one-person household in the continental U.S.), whichever is less. The Alaska and Hawaii figures are higher. The provision is now permanent.⁵

Total Balance

Each state sets a lifetime cap on ABLE balances that mirrors the ceiling on its 529 college plan, running from roughly $235,000 to nearly $600,000 depending on the state.⁶ The account can keep receiving contributions past $100,000, but the SSI treatment changes at that line.

How the Account Protects Your Benefits

SSI

For SSI purposes, the first $100,000 in your ABLE account is invisible. The Social Security Administration doesn’t count it when checking your resources against SSI’s limit.² If the balance climbs past $100,000 and that pushes your total countable resources over the SSI limit, your monthly SSI payments are suspended rather than terminated. Payments restart automatically once the balance falls back under the threshold, with no need to reapply.⁷

Watch the timing on housing withdrawals. When you pull ABLE funds to pay rent, mortgage, or utilities, SSA expects the money to reach the bill within the same calendar month you took the withdrawal. Funds sitting in checking past the end of the month can be counted as a resource and reduce your SSI for that period.

Medicaid

Medicaid rules are more generous than SSI’s. Federal law requires state Medicaid agencies to disregard everything in an ABLE account when determining eligibility, whether the balance is above or below $100,000.⁸ Even if your SSI is suspended because the ABLE balance exceeds $100,000, Medicaid coverage continues as long as the suspension was caused by the ABLE balance and you remain otherwise SSI-eligible.⁹

Other Programs

ABLE balances also do not affect eligibility for SSDI, HUD housing assistance, SNAP, federal student aid, or Medicare.⁶

What You Can Spend the Money On

Withdrawals are tax-free when used for qualified disability expenses, and the IRS defines that category broadly. The statute lists:

Education at any level, including tuition, books, and supplies
Housing, including rent, mortgage payments, utilities, and property taxes
Transportation, including vehicle costs, ride services, and public transit
Health, wellness, rehabilitation, and durable medical equipment
Employment support, job training, coaching, and workplace accommodations
Assistive technology and personal support services
Legal fees and financial management
Basic living expenses, including food
Funeral and burial costs

An expense that fits a listed category does not need a direct link to the disability itself. College tuition qualifies whether or not the coursework relates to the beneficiary’s condition.¹⁰

If you withdraw money for something that doesn’t qualify, only the earnings portion of the withdrawal is affected: it becomes taxable income and carries an additional 10% federal penalty. Your original contributions come back penalty-free. Keep receipts. The IRS can review distributions, and SSA can audit spending if you receive SSI or Medicaid.¹¹

Tax Benefits Beyond the Account Itself

Money inside the account grows tax-free, and the program is exempt from federal income tax under Section 529A.¹²¹³

Contributions may also qualify for the Retirement Savings Contributions Credit (the Saver’s Credit) on your federal return. For 2026, the credit runs up to 50% of the first $2,100 contributed, for a maximum of $1,050. The percentage drops to 20% and then 10% as adjusted gross income rises, and phases out entirely at $40,250 for a single filer, $60,375 for head of household, and $80,500 for joint filers. This provision is now permanent.

Your ABLE plan handles the two IRS forms for you. Form 1099-QA reports distributions, and Form 5498-QA reports contributions, rollovers, and year-end fair market value. Review both when you prepare your return.¹¹

Opening and Managing an Account

Most states open their plans to residents of any state, so compare fees, investment options, and any state tax deductions before choosing. To enroll, you need a Social Security number, a mailing address, and proof of eligibility. Your SSI or SSDI award letter works if you receive either; otherwise, the physician certification described earlier serves as the basis. Most plans ask for a broad diagnostic category during enrollment and activate the account within a few business days of the initial deposit.³

Plans offer investment menus grouped by risk, similar to a 401(k), and federal law caps investment changes at twice per calendar year. Pick a strategy you can leave alone rather than one you’ll want to switch every few months.

An eligible person can open and manage their own account. When someone else needs to run it, federal regulations set a priority order among authorized individuals: an agent under a power of attorney, then a conservator or legal guardian, then a spouse, parent, sibling, grandparent, and finally a representative payee appointed by SSA. The authorized individual must certify that no one higher on the list is willing and able to serve, and cannot have any personal financial interest in the account during the beneficiary’s lifetime.¹³ The beneficiary remains the legal owner regardless of who manages the account.

You can also roll money from a traditional 529 college savings plan into an ABLE account tax-free. The two accounts don’t need to share a beneficiary, but the ABLE beneficiary must be either the 529 account holder or a family member. The rolled amount counts against the annual cap, and an indirect rollover must be completed within 60 days. This provision is now permanent.⁴

What Happens When the Beneficiary Dies

Remaining funds can first pay outstanding qualified disability expenses, including funeral and burial costs. After that, the state Medicaid agency may file a claim for reimbursement of Medicaid costs paid on the beneficiary’s behalf since the account was opened. The statute treats the state as a creditor rather than a beneficiary.¹³ Any Medicaid Buy-In premiums the beneficiary paid are subtracted from the recovery amount, and some states have chosen not to pursue ABLE accounts for Medicaid payback at all.

The account holder can name a successor beneficiary, who must also be an eligible individual. If named, the remaining funds move into that person’s ABLE account after outstanding expenses and any Medicaid claim are settled. Without a named successor, the balance passes to the estate under the beneficiary’s will or state intestacy law.

1
ABLE National Resource Center. The ABLE Age Adjustment Act Fact Sheet
2
Social Security Administration. Spotlight On Achieving A Better Life Experience (ABLE) Accounts
3
ABLE National Resource Center. How Do I Open an Account
4
Internal Revenue Service. ABLE Savings Accounts and Other Tax Benefits for Persons With Disabilities
5
ABLE National Resource Center. ABLE to Work Act
6
ABLE National Resource Center. ABLE Account Contribution Limits for the Calendar Year
7
Social Security Administration. Achieving a Better Life Experience (ABLE) Accounts
8
Centers for Medicare & Medicaid Services. Implications of the ABLE Act for State Medicaid Programs
9
ABLE National Resource Center. Understanding ABLE Account Savings and Public Benefits
10
ABLE National Resource Center. Determining Whether Something Is a Qualified Disability Expense (QDE)
11
Internal Revenue Service. Instructions for Forms 1099-QA and 5498-QA
12
Internal Revenue Service. ABLE Accounts – Tax Benefit for People With Disabilities
13
Office of the Law Revision Counsel. 26 USC 529A – Qualified ABLE Programs