529 ABLE Accounts

The Achieving a Better Life Experience (ABLE) Act

The ABLE Act, which was signed into law in December 2014, allows Americans who are living with disabilities to save money for college and other expenses in a tax-deferred account as a supplement to private insurance and public benefits.

529 ABLE (529A) accounts

Similar to a 529 college savings plan, 529 ABLE accounts are savings accounts administered by the states. Money can be withdrawn tax-free when the funds are used to pay for qualified disability expenses. The contribution for 2018 is $15,000 (the amount of the annual gift tax exclusion) and many states have total contribution limits that exceed $300,000.

However, if a person's 529 ABLE account balance exceeds $100,000 they will no longer be eligible for SSI benefits. Also, if the beneficiary dies, states will be able to recoup some of expenses through Medicaid.

The signing of the PATH Act  in 2015 removed residency requirements from 529 ABLE accounts, giving individuals the option of using any state's plan. Yet some states may offer tax benefits for those who use their home state's plan.

Why 529 ABLE accounts are so important

Prior to the ABLE Act, if a person with a disability earned more than $700 per month or had savings or other assets in excess of $2,000 they risked having to forfeit eligibility for government programs like Medicaid. The only way families could get around this was to set up a special needs trust, which is often very costly to do. As a result, there has been little incentive to save, and many people with disabilities end up living below the poverty level.

Qualified disability expenses

Qualified disability expenses include education, job training and support, healthcare and financial management.

Eligibility

To qualify for a 529 ABLE account, individuals must have been diagnosed with a significant disability before they turned 26 years old, with a condition expected to last at least 12 consecutive months. The individual must also be receiving benefits under SSI and/or SSDI, or be able to obtain a disability certification from a doctor.

As of January 1, 2018, parents who have saved money in a 529 college savings account may be able to roll up to $15,000 (in 2018) of the funds into a 529 ABLE account in the event the beneficiary is later diagnosed with a disability such as autism.

Investment options

States provide families with multiple investment options to suit various savings goals and risk tolerance levels. Account owners will be able to make changes to their investments two times per year.

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States with active 529 ABLE accounts

Each state will establish their own regulations to make 529 ABLE accounts available. Here are states that currently or will soon offer ABLE programs:

StatePlan NameResidency RequirementState Tax DeductionTotal Asset-Based Expense RatioDebit or Purchasing Card?
AlabamaEnable Savings Plan AlabamaNONO0.50%-0.56%YES
AlaskaAlaska ABLE PlanNONO0.34%-0.38%NO
ArizonaAZ ABLEYESContributions to the STABLE Account Plan are not deductible for Arizona state income tax purposes. Earnings from the investment of contributions to a STABLE Account Plan will not be subject to Arizona state income tax, to the extent such earnings are exempt from U.S. federal income taxation under Section 529A. 0.19%-0.34%YES
ColoradoColorado ABLENONO0.34%-0.37%YES
District of ColumbiaDC ABLENONO0.34%-0.37%YES
FloridaABLE UnitedYESNO0.035%-0.29%NO
GeorgiaGeorgia STABLEYESContributions to the STABLE Account Plan are not deductible for Georgia state income tax purposes. Earnings from the investment of contributions to a STABLE Account Plan will not be subject to Georgia state income tax, to the extent such earnings are exempt from U.S. federal income taxation under Section 529A.0.19%-0.34%YES
IllinoisIllinois ABLENONO0.34%-0.38%NO
IndianaINvestABLE IndianaNONO0.34%-0.37%YES
IowaIAble PlanNOIowa individual taxpayers who make a contribution can deduct up to $3,239 for 2017 (adjusted annually for inflation) of their contributions including rollovers from a Non-Iowa 529A plan, in determining their adjusted gross income for Iowa income tax purposes.0.34%-0.38%YES
KansasKansas ABLE Savings PlanNONO0.34%-0.38%NO
KentuckySTABLE KentuckyYESNO0.19%-0.34%YES
LouisianaLA ABLEYESNO0.13%0.15%NO
MarylandMaryland ABLENOEach beneficiary or individual who contributes to the beneficiary's ABLE account can deduct up to $2,500 of contributions each year from his/her Maryland income per beneficiary—$5,000 for two, $7,500 for three, etc. Contributions in excess of $2,500 can be deducted for up to the next 10 years. Contributions in following years could be eligible for deduction; however, more than $2,500 per beneficiary may not be deducted in any year and the 10-year limit on each year's contribution may not be extended.0.30%-0.381%YES
MassachusettsAttainable Savings PlanNONO0.57%-0.94%YES
MichiganMiABLENOContributions to a plan account are deductible, in an amount not to exceed $10,000 for married taxpayers filing jointly ($5,000 for single taxpayers and for married taxpayers filing separate returns), in computing the contributor's taxable income under Michigan law.0.50%-0.78%YES
MinnesotaMinnesota ABLE PlanNONO0.34%-0.38%NO
MissouriMO ABLEYESMissouri residents and taxpayers may deduct the amount of their contributions to a MO ABLE Account from their Missouri adjusted gross income. Annual contributions made to the MO ABLE program up to and including eight thousand dollars ($8,000) per participating taxpayer, and up to sixteen thousand dollars ($16,000) for married individuals filing a joint tax return, shall be subtracted in determining Missouri adjusted gross income.0.19%-0.34%YES
MontanaMontana ABLENOAny earnings on contributions are not subject to Montana state income tax. Account assets grow free of current Montana income tax and are tax-free if withdrawn for qualified disability expenses.0.34%-0.37%YES
NebraskaEnable Savings PlanNOContributions by anyone who files a Nebraska state income tax return are eligible to receive a Nebraska state income tax deduction for their own contributions of up to $10,000 ($5,000 if married, filing separately).0.50%-0.56%YES
NevadaABLE NevadaNONO0.34%-0.38%YES
New HampshireSTABLE New HampshireYESNew Hampshire does not have a state income tax. Pursuant to New Hampshire RSA 195-K:4, income and distributions from any qualified ABLE program as defined in the Internal Revenue Code of 1986, as amended, shall be exempt from the interest and dividends tax pursuant to RSA 77:4-h, provided that distributions from the plan which are subject to federal income tax shall be subject to the interest and dividends tax pursuant to RSA 77 on the accrued income portion of the savings plan distribution.0.19%-0.34%YES
New MexicoABLE New MexicoYESContributions to the Plan are not deductible for New Mexico state income tax purposes. However, contributions to the Plan that are considered non-taxable "gifts" for federal income tax purposes are subject to the same treatment for New Mexico state income tax purposes. Earnings grow tax-deferred from New Mexico state income tax. Earnings are not subject to New Mexico state income tax while they remain in a STABLE Account. 0.19%-0.34%YES
New YorkNY ABLEYESNO0.40%YES
North CarolinaThe NC ABLE ProgramNONO0.34%-0.38%YES
OhioSTABLE AccountNOContributions are deductible for Ohio state income tax purposes, up to $2,000 per year, per STABLE Account contributed to, with unlimited carry forward.0.19%-0.34%; 0.45%-0.60%YES
OklahomaOklahoma STABLEYESContributions to Oklahoma STABLE are not deductible for Oklahoma state income tax purposes. Earnings grow tax-deferred from Oklahoma state income tax and are not subject to Oklahoma state income tax while they remain in an Oklahoma STABLE account. 0.19%-0.34%YES
OregonABLEforAllNOContributions to an ABLE account with a beneficiary under the age of 21 are deductible for Oregon income tax purposes up to annual limits. For 2016, the deduction is $4,660 for taxpayers filing jointly and $2,330 for single filers.0.30%-0.3810%YES
OregonOregon ABLE Savings PlanYESContributions to an ABLE account with a beneficiary under the age of 21 are deductible for Oregon income tax purposes up to annual limits. For 2016, the deduction is $4,660 for taxpayers filing jointly and $2,330 for single filers.0.30%-0.381%YES
PennsylvaniaPA ABLENONO0.34%-0.38%YES
Rhode IslandRI's ABLENONO0.34%-0.38%NO
South CarolinaSC ABLE Savings ProgramYESContributions to the Plan are deductible for South Carolina state income tax purposes. South Carolina residents and taxpayers may deduct the amount of their contributions to a STABLE Account from their South Carolina adjusted gross income, up to $14,000, for each STABLE Account to which they have contributed. Earnings grow tax-deferred from South Carolina state income tax.0.19%-0.34%YES
TennesseeABLE TNNONO0.00%-0.62%NO
TexasTexas ABLEYESN/A; Texas does not impose a state income tax on individuals.0.25%-0.65%NO
VermontVermont ABLEYESNO0.19%-0.34%YES
VirginiaABLEAmericaNOVirginia permits a Virginia individual income tax deduction for contributions to accounts. The amount deducted on any individual income tax return in any taxable year is generally limited to $2,000 per account. Contributors may carry forward any un-deducted amounts until their contributions have been fully deducted. If the contributor has attained age 70, he or she may deduct the entire amount contributed to an account, less any amounts previously deducted. 0.40%0.85%YES
VirginiaABLEnowNOA Virginia individual income tax deduction of up to $2,000 per account on contributions, with unlimited carryovers to the extent of the contributions.0.37%-0.40%YES
West VirginiaWV ABLEYESContributions to the Plan are not deductible for West Virginia state income tax purposes. Earnings grow tax-deferred from West Virginia state income tax, to the extent such earnings are exempt from U.S. federal income taxation under Section 529A. 0.19%-0.34%YES
WyomingWY ABLEYESWyoming does not have state income tax. 0.19%-0.34%YES