Achieving a Better Life Experience (ABLE) IRS 529A Savings Accounts

by Peter Tassoni | Dec 04, 2018

It is more than just saving. It is investing for a better life.

Washington State launched an ABLE program in July 2018 at ABLE Accounts are tax-advantaged savings accounts for individuals with disabilities. The monies in these accounts are exempt from federal means tested eligibility determinations. ABLE accounts allow for contributions up to $15,000 per year. The account contributions, earnings and qualifying disability withdrawals are all tax-free.

Why ABLE accounts were created

The U.S. tax code provided significant tax benefits to parents who save money for their children's college education in 529 plans, but parents of people with disabilities had no similar way to save for their children's future needs, such as occupational therapy or assisted living. Further, families that did try to save money for such things often ended up costing their children access to government assistance. The ABLE Act amended Section 529 in an effort to correct this.

In December 2014, Congress passed the Stephen Beck, Jr. Achieving a Better Life Experience Act, which added Section 529A to the federal tax code. This enabled eligible individuals with disabilities to save money in a tax-exempt account that may be used for qualified disability expenses. The ABLE Act was considered by many to be one of the most significant pieces of legislation for the disability community since the Americans with Disabilities Act. This law was the result of nearly a decade-long cross-disability grassroots effort. The December 2017 Tax Cuts and Jobs Act enhanced the ABLE program further.

Setting up an ABLE account

Although the federal tax code allows for ABLE accounts, it's up to the states to actually set up and administer the programs—just as the states administer 529 programs. Forty states have launched ABLE programs with Washington State launching their program in July 2018.

When you contribute money to 529 plans, the state invests the money on your behalf. Unlike with a typical IRA or 401K, you can't dictate how the money is invested outside of making choices as to how aggressive or conservative the money is to be invested, within limits. The Washington State ABLE program provides four investment options: interest earning savings account, conservative investment option, moderate investment option and an aggressive investment option.

Enrollment is through the online portal or the submission of forms downloaded from the program’s website. The person with the disability can be the account owner of only one ABLE account nationwide. A parent of a minor, guardian, or person with a power of attorney over the beneficiary can help set up and manage the ABLE account. Contributions to the ABLE account can come from anyone: family, friends, employers, and the account owner / beneficiary. The Washington state ABLE program has electronic gifting and account owners can essentially run a “go fund me” campaign to solicit contributions to help them reach a qualified disability expenditure.

To be eligible for an ABLE account, the person must have been blind or disabled before age 26 to qualify. They can be older now but their qualifying disability event must have occurred before their 26th birthday. The ABLE act defaults to the Social Security Administrations definition of disability. There are currently 233 conditions listed on the SSA’s Compassionate Allowances Conditions. The ages of Washington State ABLE account owners range from two years old to 72 years, as of October 2018.

Tax benefits of ABLE accounts

Contributions to an ABLE account are not tax-deductible, but all investment earnings remain untaxed as long as money taken from the account is used for "qualified disability expenses.” A qualified disability expense is any expense related to the designated beneficiary’s blindness or disability that assists him/her in increasing and/or maintaining their health, independence, and/or quality of life. These may include expenses related to education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services, and other disability-related expenses that the beneficiary might incur as a result of having a disability.

An individual can contribute up to $15,000 a year to any ABLE account and each ABLE account can only receive $15,000 a year in contributions. The $15,000 is the IRS determined annual gift tax amount for 2018. However, the 2017 Tax Cut and Jobs Act allowed ABLE account owners to contribute up to $12,060 from their employment earnings to their ABLE account in 2018. This ABLE to Work amount is based on the federal poverty limit for a one-person household from the previous year. The 2019 contribution amount for Washingtonians living in the evergreen state will increase to $12,140. The contributions may qualify for the Saver's Credit. These 2017 Tax Cut and Jobs Act enhancements expire after 2025. Overall, an employed person with a disability may contribute $27,060 into their ABLE account.

This makes an ABLE account like a Roth IRA on steroids. ABLE accounts can be used as retirement accounts, rainy day funds, health savings accounts, and daily spending accounts all rolled into one account. There are no early withdrawal penalties or minimum distributions like Roth IRAs if the account owner is using their money for qualified disability expenses.

As with education 529 plans, taxes apply if money is withdrawn from an ABLE account for something other than qualifying expenses. Usually, the beneficiary will have to pay income taxes on the portion of the withdrawal that consists of investment earnings plus a 10% tax penalty.


ABLE accounts are reported to the IRS annually and the account owner will receive the new IRS 5498-QA form. The form shows the contributions made to the ABLE account.

The 2017 Tax Cuts and Jobs Act also allow for the rollover of 529 education savings plans to 529A ABLE saving plans. Specifically, after December 22, 2017, but before January 1, 2026, taxpayers may roll over limited funds from a Qualified Tuition Program (QTP) to an ABLE account without penalty or income tax consequences. The rollover must occur within 60 days of the distribution. The designated beneficiary of the ABLE account must be:

  • the same as the designated beneficiary of the QTP, or
  • a family member of the designated beneficiary of the QTP.

These education 529 plan rollovers will also show up on the IRS form 5498-QA.

Although ABLE accounts are not counted as assets for federal benefit programs, monthly reports are sent to the Social Security Administration because Social Security Income (SSI) program only allows the first $100,000 in the ABLE account to be ignored. Any amount over $100,000 is counted as a resource and subject to spend down or monthly SSI cash benefit reductions. All other federal means tested benefit programs like Medicaid, SNAP, Housing subsidy, etc. exempt the money in an ABLE account regardless of how high the ABLE account balance reaches.

In Washington State, the maximum account limit is $500,000. Realize that at the current $15,000 per year contribution rate, it will take several decades to reach the maximum account limit. Nationally, ABLE account balances are averaging $4,600. Over 25,000 accounts have been opened and over $120 million in assets under management have been recorded in 2018.

A key feature of ABLE accounts is that the money in an account is not treated as personal assets of the account's beneficiary. This is important because federal law generally bars individuals from receiving assistance such as Apple Health, housing aid and food stamps if they have more than $2,000 worth of financial assets. Many individuals with disabilities need government services at some point in their lives, especially after their parents die or when family members can no longer care for them. Advocates for the disabled have long argued that the $2,000 cutoff effectively punished those families who planned ahead. The federal $2,000 resource limit has not been raised since 1983.


The Washington State ABLE program offers a low $35 annual administrative fee and investment manager fees between 30 and 38 basis points, depending on the investment option selected. The ABLE account can be used in conjunction with a special needs trust account. Both are complimentary to one another. Generally, special needs trusts are better vehicles for larger lump sum contributions. ABLE account’s ease of use by the account owner may allow for greater community inclusion because the account owner can use the prepaid MasterCard at online and point of sale retailers and not wait for the trust manager to release funds.

The Washington state ABLE account can be managed online, so it’s easy to access, make contributions, withdraw money, or load a prepaid card. It only takes a $25 contribution to get things rolling. See or call 844.600.ABLE for details.

Peter Tassoni headshotPeter Tassoni, is WA ABLE program administrator, with the Washington State Department of Commerce. You can reach him at

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