529A Accounts for Special Needs Individuals

529A Accounts for special needs individuals depicts photo of graduate and their shadow.

The Achieving a Better Life Experience (ABLE) Act created tax-favored accounts for individuals with disabilities. These 529A accounts are intended to be a low-cost alternative to special needs trusts. We cover the specifics below.

Presented by Kevin M. Curley, II, CFP®: 

Life with disabilities can have its own special challenges. The Achieving a Better Life Experience (ABLE) Act of 2014 enables the use of ABLE accounts to help families and caregivers with tax-free investing designated to help care for loved ones.

What you need to know about opening a 529A Account

Much like 529 college savings programs, ABLE 529A accounts are administered by individual states. When you contribute money, the state invests it based on your investment strategy. Similar to 529 plans, the account owner can make changes to their account investments only two times per year.

Most states have implemented ABLE programs. The PATH Act signed in 2015 allows for enrollment nationwide, though some states may offer tax benefits for using your home state’s plan.

To qualify, beneficiaries must have a significant disability that they were diagnosed with before age 26 and that disability must be expected to last for at least 12 consecutive months. However, beginning in January 2026, the eligibility age for ABLE accounts will rise to age 46.

Currently, the following requirements must be met to open an account:

  • U.S. citizens and permanent residents who can legally own securities
  • Individuals with a physician’s written and signed diagnosis
  • Individuals whose significant disabilities had an age onset before their 26th birthday

Note: The age restriction on who can open an ABLE account does not mean that the individual opening the account must be younger than 26 years old.

Those who meet the above criteria and are already receiving Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are already eligible to open them. Those who meet these criteria but are not receiving SSI or SSDI must obtain a disability certificate from their doctor before beginning the process.

Who can contribute to an ABLE account?

Though an ABLE account is owned by the disabled person as the beneficiary, contributors to the account can include:

  • Parents
  • Grandparents
  • The beneficiary
  • Extended Family
  • Friends
  • Charity or Trust

Details on Contributions

  • Contributions for 2023 are limited to $17,000 ($18,000 in 2024) per individual per year, which matches the IRS annual gift tax exclusion amount.
  • Contributions are ineligible for the five-year-averaging rules available to standard 529 college savings plans.
  • Unlike contributions to traditional 529 plans, contributions to 529A accounts are irrevocable.

These accounts typically will not disqualify the disabled individual from most state or federal aid, such as Medicaid or Social Security. Only the first $100,000 in the account, however, is exempt from the Supplemental Social Security Income (SSI) limit of $2,000 (beneficiaries will still receive Medicaid if the account exceeds $100,000).

The Tax Cuts and Jobs Act of 2017 included several provisions that expanded the ability to contribute to ABLE plans:

  1. Owners of traditional 529 accounts are allowed to roll over these accounts to ABLE (529A) accounts, though the amount that can be rolled over is limited to the annual contribution limit.
  2. Beneficiaries who are employed but do not participate in an employer retirement plan can contribute up to 100 percent of their earned income up to the prior year’s poverty line amount for a one-person household ($14,580 for 2023 in the continental U.S.).
  3. Qualifying ABLE beneficiaries may claim the Saver’s Credit based on contributions made to their account.

About Distributions

Qualified distributions may be taken over the beneficiary’s lifetime to cover the costs of medical expenses, education, transportation, employment training and support, and housing. Nonqualified distributions are subject to income tax on earnings as well as a 10 percent penalty.

Funds remaining in the account when the disabled individual passes away will be used to repay the state for any benefits received under a state Medicaid plan.

Tax advantages for ABLE accounts

The savings in ABLE accounts grow tax-free if used for individuals with disabilities, provided they make withdrawals for qualified disability expenses such as:

  • Housing
  • Transportation
  • Education
  • Healthcare and wellness expenses
  • Assistive technology
  • Employment training and support services
  • Basic living needs associated with improvement of health, independence, and quality of life
  • Financial management and administrative services
  • Legal and professional fees

If withdrawals are used for purposes other than qualified disability expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. Some states even offer their taxpayers a state income tax deduction on their contributions made to ABLE accounts in that state.

Additional factors

For up-to-date information on which states offer 529A plans and their specific provisions, visit www.savingforcollege.com and go to 529 plans > 529 ABLE accounts.

Before you sign up, remember to:

  • Find out if your account offers a debit card
  • Consider the cost of fees associated with maintaining the account
  • Look for any tax benefits

There are a variety of strategies for ABLE accounts, such as building savings, paying expenses now and saving for later, or saving for a rainy day. It’s best to seek the advice of your financial advisor to help you weigh your objectives.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.


Kevin M. Curley, II is a financial advisor located at Global Wealth Advisors 100 Crescent Court, 7th Floor, Dallas, TX 75201. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA  / SIPC,  a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (214) 613-6580 or at info@gwadvisors.net.

© 2023 Commonwealth Financial Network®

Back To Blog