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The maximum amount that can be contributed each year to an ABLE account for a person with disabilities rose $1,000 to $16,000 on January 1, 2022. The figure, which is tied to the inflation-adjusted value of the IRS’s gift tax exclusion, had been stuck at $15,000 since 2018. Meanwhile, all but four states now offer ABLE programs.
Acheiving a Better Life Experience (ABLE) Act
Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014, amending the Internal Revenue Code to allow families to create new tax savings plans, modeled after the popular 529 savings plans for higher education, that allow money to be set aside for or a person with special needs to pay for disability related expenses.
This money can grow tax-free over time and is used to pay for qualifying expenses toward the care and support of the special needs beneficiary.
These accounts are administered by the individual states and accept contributions in the form of cash only (not bonds, securities, real estate, or other assets). A major benefit of ABLE accounts is that the beneficiary can manage and control them once they come of age.
People with disabilities who are employed can save even more beyond the $16,000 limit in an ABLE account, up to the federal poverty level for a single individual. This means that those in the lower 48 states can invest an additional $12,880 this year. Hawaii residents can save an extra $14,820, and the figure is $16,090 in Alaska.
Limits on ABLE Accounts
However, the total amount that can be held in an ABLE account without jeopardizing government benefits like Supplemental Security Income (SSI) remains at $100,000.
For individuals who are not receiving such means-tested benefits, the maximum account limit is tied to the account limit for the particular state’s 529 programs, which in 2022 can range from $300,000 to $517,000.
As of January 2022, 46 states and the District of Columbia had set up ABLE programs, although if your state does not yet have its own program, many state programs allow out-of-state beneficiaries to open accounts. The newest states to add programs are Connecticut and Utah. Four states – Idaho, North Dakota, South Dakota and Wisconsin – do not yet have active ABLE programs, according to the ABLE National Resource Center.
- Access an introduction to ABLE Accounts.
- Read this article comparing ABLE accounts with special needs trusts.
- Check out the Special Needs Answers directory of ABLE account programs, organized by state.
- Academy of Special Needs Planners member Oak Wealth Advisors offers a map showing which state programs are open to all and a matrix that compares the state ABLE programs.
Full description of infographic: Title reads "Why Consider an ABLE Account?" and features 11 blocks of content that read as follows: Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014; For families who have dependents with disabilities: The ABLE Act provides a way to set aside savings money, tax-free, for their loved one; ABLE Accounts can hold up to $100,000; ABLE Accounts are for people with disabilities who were diagnosed with a disability before age 26; Individuals with disabilities can manage their own ABLE accounts, giving them a measure of financial independence; Up to $17,000 per year can be contributed to an ABLE Account; Nearly 120,000 have ABLE accounts nationwide; ABLE Accounts can help pay for disability treatment, assistive technology, education and training, housing, living expenses, health care, legal fees, and transportation; As of 2022, 46 states as well as the District of Columbia have active ABLE account programs in place; Did You Know? ABLE account owners are not at risk of losing their eligibilty for government benefits, such as SSI or Medicaid; Find an ABLE Account program in your state: specialneedsanswers.com/able-accounts.