The ABLE Act amends the Internal Revenue Code to allow eligible individuals with disabilities and their families to establish a tax-exempt savings account that allows disbursements of income tax-free funds for “qualified disability expenses”. People of any age who developed a qualifying disability before age 26 can open an ABLE account and contribute up to $14,000 per year. The money can be used tax-free for any expenses that benefit the person with the disability, and up to $100,000 in the account doesn’t count toward the $2,000 asset limit for Supplemental Security Income benefits. A “qualified disability expense” means any expense related to the designated beneficiary as a result of living a life with disabilities. These expenses include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses described in regulations by the Treasury Department.
To qualify for an ABLE account, you must meet Social Security’s definition of having “severe functional limitations” with an onset of the disability before age 26. Those who are receiving benefits under Supplemental Security Income or Social Security Disability Insurance (and who started receiving those benefits before age 26) are automatically eligible to open an ABLE account. ABLE accounts are administered by the states including Michigan.