Internal Revenue Code Section 529A: ABLE Accounts, SSI, and Medicaid

ABLE accounts are tax-advantaged savings accounts, authorized by Internal Revenue Code Section 529A, for people whose disability began before a set age. Starting January 1, 2026, that age threshold rises from 26 to 46, the annual contribution cap is $19,000 from all sources combined, and the money grows free of federal income tax as long as it pays for disability-related expenses.¹ Just as important, the balance sits outside the resource limits that would otherwise cost you Supplemental Security Income or Medicaid.

Who Can Open One

Section 529A gives you two ways to qualify. If you already receive Social Security Disability Insurance or Supplemental Security Income based on blindness or disability, and that condition began before age 46, you are automatically an eligible individual. No extra paperwork beyond what you filed for those benefits.¹

If you don’t receive SSI or SSDI, you can still qualify through a disability certification. The certification confirms a physical or mental impairment causing marked and severe functional limitations, expected to last at least 12 continuous months or result in death, with onset before age 46. A physician’s signed diagnosis is part of the file.¹ Most state programs ask you to self-certify during enrollment rather than upload the physician’s letter, but you should keep the letter with your records in case the IRS asks.²

The 2026 Age Change

Before 2026, disability had to begin before age 26. The ABLE Age Adjustment Act, enacted as part of SECURE 2.0 in December 2022, moves the threshold to age 46 effective January 1, 2026.³ This is the largest expansion in the program’s history and reaches people who acquired a disability in their late twenties, thirties, or early forties.

How Much You Can Contribute

The standard annual contribution limit tracks the federal gift tax exclusion under Section 2503(b). For 2026, that is $19,000.⁴ The cap covers everything going into the account combined: your own deposits, family, friends, employer contributions. Contributions must be in cash, which includes checks and electronic transfers, not stocks or other property.¹

Extra Room If You Work

If you earn income from a job, the ABLE to Work provision lets you add more on top of the $19,000. The extra amount is capped at the lesser of your earned income for the year or the federal poverty level for a one-person household in the preceding calendar year. For 2026 contributions, the relevant poverty figure is $16,650 (the 2025 level for the continental United States), so the maximum possible total contribution is $35,650.⁵ One condition: the extra allowance is not available if your employer already contributes to a retirement plan on your behalf for that tax year.¹

ABLE to Work was temporary from 2018 forward and became permanent on January 1, 2026. If you otherwise qualify for the saver’s credit on your federal return, ABLE to Work contributions may count toward that credit.⁶

Overall Balance Caps

Each state program caps the total that can accumulate in an account, generally matching the state’s 529 college savings plan limit. Aggregate caps run from roughly $235,000 to nearly $600,000 depending on the program. Hitting the cap simply blocks further contributions until the balance drops; it doesn’t trigger tax. The SSI resource threshold discussed below kicks in well before any of these state caps.

What You Can Spend the Money On

Section 529A defines qualified disability expenses broadly: any expense related to the account owner’s blindness or disability that benefits the beneficiary. The statute lists education, housing, transportation, employment training and support, assistive technology, personal support services, health and wellness, financial management and administrative services, legal fees, oversight and monitoring, and funeral and burial expenses.⁷

In practice the definition is generous. Groceries, rent, a smartphone used for accessibility apps, ride-share fees to a medical appointment, tuition for a job training course can all qualify. The test is whether the expense relates to your disability and benefits you as the account owner. Keep receipts and records for every withdrawal; the IRS doesn’t want them attached to your return, but you’ll need them if asked to show a distribution was qualified.

Housing Without an SSI Penalty

Many SSI recipients used to worry that paying rent or a mortgage from an ABLE account would cut their SSI check under the in-kind support and maintenance rules. It doesn’t. The Social Security Administration treats ABLE distributions as a conversion of one resource into another, not as income, even when the money goes to rent, mortgage, utilities, or property taxes.⁸ One caveat: if you withdraw money and don’t spend it within the same calendar month, the leftover cash sitting in your checking account becomes a countable resource starting the following month.

Tax Treatment and Reporting

Withdrawals used for qualified disability expenses come out entirely free of federal income tax, including the portion representing investment earnings. Contributions were already made with after-tax dollars, so those are never taxed again regardless of how they’re used.

Withdrawals beyond your qualified expenses for the year are treated differently. The earnings portion of the excess is included in your gross income and hit with an additional 10% tax.¹ Tracking expenses through the year prevents accidental overwithdrawals. Some states also allow income tax deductions or credits for contributions, with amounts varying by state.

Two IRS forms document the account. Your state program issues Form 5498-QA reporting contributions, rollovers, cumulative contributions, and year-end fair market value; you’ll receive a copy by March 15 of the following year. If you take distributions, the program also issues Form 1099-QA breaking each distribution into gross amount, earnings, and return of basis. You use those figures to determine whether any portion of your withdrawals is taxable.⁹

Protection for SSI and Medicaid

This is the core reason ABLE accounts exist. Without Section 529A, an SSI recipient could lose benefits for holding more than $2,000. ABLE accounts create a protected space for savings, though the rules for SSI and Medicaid are not identical.

SSI

For SSI, the first $100,000 in an ABLE account is disregarded as a resource. If the balance grows enough to push your total countable resources over the SSI limit, monthly SSI cash payments are suspended, not terminated. Eligibility remains, and payments automatically resume once the balance falls back within limits. During any suspension you keep your Medicaid.⁸

Medicaid

Medicaid is more generous. Federal guidance from the Centers for Medicare and Medicaid Services directs states to disregard all funds in an ABLE account for Medicaid eligibility, with no $100,000 cap. That $100,000 threshold applies only to SSI.¹⁰

Medicaid Payback After Death

After the account owner dies, the state where the beneficiary received Medicaid can file a claim against the remaining balance to recover what it paid for medical assistance. The claim only covers costs incurred after the account was established, and it is reduced by any premiums the beneficiary paid into a Medicaid Buy-In program. Before the state collects, the account first pays any outstanding qualified disability expenses and the beneficiary’s funeral and burial costs.¹¹ Anything left goes to the beneficiary’s estate or designated heirs.

Rollovers and Beneficiary Changes

You can only have one ABLE account at a time, but you can move it. A rollover from one state’s program to another is allowed once every 12 months. The full balance transfers without counting against the annual contribution limit, and the old account is typically closed within 60 days.¹² Some programs charge a small outgoing transfer fee.

Money in a 529 college savings plan can also roll into an ABLE account for the same beneficiary or a family member of the original 529 beneficiary. The transfer must happen within 60 days of the 529 distribution and is not taxable.¹³ Unlike a state-to-state ABLE rollover, a 529-to-ABLE rollover does count against the $19,000 annual cap. Rolling $15,000 from a 529 in 2026 leaves only $4,000 of room for other contributions that year. This provision was set to expire but became permanent on January 1, 2026.

The designated beneficiary can also be changed to another eligible individual who is a member of the original beneficiary’s family. The new beneficiary must qualify on their own under the eligibility rules. That change is not treated as a taxable distribution.

How to Open One

Most state ABLE programs accept residents from any state, so you are not limited to your home state’s plan. Comparing fees and investment options across programs is worth the time; annual maintenance charges and expense ratios vary. Before you start, gather your Social Security number, date of birth, and either an SSI or SSDI award letter or a signed disability certification from your physician.²

Enrollment happens online through the state program’s portal. The application asks you to self-certify eligibility, pick investment options, and provide bank information for the initial deposit. If the beneficiary cannot manage the account independently, an authorized legal representative such as a parent, guardian, or someone with power of attorney can open and manage it on their behalf. The initial electronic transfer usually clears within a few business days, and from there contributions and withdrawals run through the program’s online dashboard.

1
Office of the Law Revision Counsel. 26 USC 529A – Qualified ABLE Programs
2
ABLE National Resource Center. How Do I Open An Account
3
ABLE National Resource Center. The ABLE Age Adjustment Act Fact Sheet
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
ABLE National Resource Center. ABLE to Work Act
6
Internal Revenue Service. Retirement Savings Contributions Credit (Saver’s Credit)
7
Legal Information Institute. 26 USC 529A(e)(5) – Qualified Disability Expenses
8
Social Security Administration. Program Operations Manual System (POMS) – Achieving a Better Life Experience (ABLE) Accounts
9
Internal Revenue Service. Instructions for Forms 1099-QA and 5498-QA
10
Centers for Medicare and Medicaid Services. Implications of the ABLE Act for State Medicaid Programs
11
Social Security Administration. Spotlight On Achieving A Better Life Experience (ABLE) Accounts
12
ABLE National Resource Center. Frequently Asked Questions
13
Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs