What Can ABLE Account Money Be Spent On?

What Is an ABLE Account?

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ABLE (Achieving a Better Life Experience) accounts offer people with disabilities a great, tax-free way to accumulate money without jeopardizing their qualifications for Supplemental Security Income (SSI) and other means-tested programs. Withdrawals are tax-free as long as the money is used for “qualified disability expenses.”  

The arguments for starting and maintaining such funds are overwhelming, not least of which is the wide variety of things on which the money can be spent.

To build 529A ABLE accounts, beneficiaries (and other contributors) can put up to $17,000 total into these funds each year (in 2023). Other restrictions apply. Only those whose disabilities were diagnosed before turning 26 are eligible for an ABLE savings plan. (Note that this will change in 2026.) 

The total value of the account must remain below $100,000 for the beneficiary to qualify for government benefits. Also, the money must be spent only on items, services and activities that the Internal Revenue Service (IRS) deems qualified disability expenses (QDEs).

Qualified Disability Expenses (QDEs)

The ABLE Act, passed by Congress in 2014, originally defined QDEs as:

• education, housing, transportation

• employment training and support

• assistive technology and personal support services

• health, prevention, and wellness

• financial management and administrative services

• legal fees

• expenses for oversight and monitoring

• funeral and burial expenses

The language of the Act concludes this list with: “and other expenses which are approved by the Secretary under regulations and consistent with the purposes of this section.”

Subsequent regulations and recent revisions by the Social Security Administration (SSA) and the IRS have expanded the list. As of 2022, for instance, the SSA has determined that food qualifies as a QDE, whether in the form of groceries or restaurant meals. 

The Purpose of ABLE Accounts

To clarify the purpose of ABLE accounts, the Treasury Department and IRS issued a bulletin in 2015 to the effect that “qualifying disability expenses” should be “broadly construed” to include any benefit related to the designated beneficiary “in maintaining or improving his or her health, independence, or quality of life.”

“There is no complete list of QDEs, but the category is very broad, including any expense paid for the benefit of the eligible beneficiary,” Juliana Crist, senior consultant at AKF Consulting, an advisor to state-run municipal plans, told Investopedia.

More Advice on ABLE Account Spending

The ABLE National Resource Center offers advice on what to spend ABLE funds on and when, stressing that an expenditure need not be disability related. Need a car? That’s eligible, as is a smartphone. As noted above, education qualifies, as does anything needed for classes, such as books and a laptop.

It is always best to use ABLE funds on those things that are explicitly described as QDEs, while using money from other sources for those things that might not qualify. The ABLE National Resource Center advises using public benefits for key expenditures, reserving ABLE funds for those things less likely to be covered by such things as Medicaid.

Experts advise keeping records on what you have spent ABLE funds, should the IRS decide to include you on one of its random audits. Misuse of ABLE account funds could result in tax penalties and possible loss of public benefits.

But the rationale for starting and building an ABLE account is compelling — and keeping the account growing more so, as more items are included in allowable expenditures. Before you open an ABLE account for yourself or a family member with disabilities, or if you have questions on how the money should be spent, be sure to consult with a  qualified special needs planner in your area.

Access a directory of state ABLE account 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.