What Is an ABLE Account - ABLE Account Rules

What Is an ABLE Account?

ABLE Account Rules

An ABLE Account is a special bank account that enables certain people with disabilities to save more money than they would otherwise be able to, in tax advantaged savings accounts — while continuing to receive benefits from Medicaid, the Supplemental Security Income (SSI) program, Social Security Disability Insurance (SSD or SSDI), or housing assistance.

The 2014 Achieving a Better Life Experience (“ABLE”) Act authorized states to permit tax advantaged accounts in which people receiving disability benefits could accumulate more financial resources than permitted by the standard eligibility criteria. The ABLE account can have up to $100,000 in deposits which are not counted against the disabled person’s financial resource limits for public disability benefit’ program eligibility.

The attorneys at Ely J. Rosenzveig & Associates, have years of experience counseling clients in the creation and use of ABLE accounts in New York. People with special needs should understand the details of how the funds in the ABLE account can be used for disability qualified expenses (DQEs) without incurring tax liability. This blog post explains who can open an ABLE account, how it can be funded, how funds can be contributed to, and distributed from, the account, and how an ABLE account affects a person’s eligibility for other public disability benefits.

If you have more questions or you want to learn more about New York ABLE accounts, contact our knowledgeable elder law and special needs attorneys at Ely J. Rosenzveig & Associates.

What Is the Benefit of an ABLE Account?

Medicaid, Supplemental Security Income (SSI), and housing assistance are three government benefit programs that use means tests to determine a recipient’s eligibility. The programs are designed for persons with low incomes and very limited available financial assets. If a benefit applicant or a current recipient has income or resources exceeding the program’s eligibility limits, their benefits are denied, suspended or terminated.

What Is an ABLE Account - ABLE Account Rules
Contributions to the ABLE account are not taxable if the money is used to pay for a Qualified Disability Expense (DQE).

But suspending benefits paid to disabled people who accumulate savings above the program’s limit proved to be counterproductive. Congress decided that it was a better policy to enable Medicaid and SSI recipients to create accounts into which they could deposit additional savings and accept contributions from others who wished to help them pay for uninsured DQEs. The goal was to ease the burden under which these benefit recipients lived their daily lives and to encourage them to seek self-sufficiency without penalizing them through benefit denials, suspensions, and terminations.

The ABLE account will only be counted against the means tested public benefit program’s eligibility resource limit to the extent that it exceeds $100,000 in value. For example, if the ABLE account grows to $102,500, then the additional $2,500 will be counted as available financial resources by Medicaid and SSI in addition to any other resources owned by the benefit recipient.

Tax Free Distributions for Qualified Disability Expenses

Contributions to the ABLE account are not taxable if the money is used to pay for a Qualified Disability Expense (DQE). If money from the ABLE account is distributed for a non-DQE, then the amount withdrawn from the account for that purpose is subject to income tax and may be counted against the benefit program’s income or resource eligibility cap.

Investing the funds deposited in an ABLE account can be a wise hedge against inflation and may also lead to substantial growth in the account’s value. Money acquired through earnings from investments on the ABLE account is also tax free if used for approved DQEs.

Approved Qualified Disability Expenses

The funds deposited into the beneficiary’s ABLE account enjoy the law’s income tax exemption benefits when used for these disability-related (qualified) purposes:

  • Education
  • Housing
  • Transportation
  • Employment training and support
  • Assistive technology and related services
  • Health
  • Prevention and wellness
  • Financial management and administrative services
  • Legal fees
  • Expenses for ABLE account oversight and monitoring
  • Funeral and burial, and,
  • Basic living expenses.

When ABLE account funds are used for non-DQE purposes, then the funds are considered income or assets available to the public benefit program beneficiary.

Saver’s Credit

Many disabled recipients of Medicaid, SSI, and other means-tested benefit programs do engage in some employment. If their employer does not contribute to an IRA or 401k plan for the ABLE account beneficiary, then the disabled employee can receive an income tax credit for 50% of their contribution to the ABLE account. This tax credit became effective in 2018 and is applicable if the ABLE beneficiary’s annual adjusted gross income does not exceed $20,500.

A smaller tax credit is available to ABLE account beneficiaries who earn more than this threshold sum.

Who Can Open a New York ABLE Account?

ABLE accounts may be opened by or on behalf of a disabled person who meets the following criteria:

  • Is a New York resident at the time of application
  • Has a disability that began before their 26th birthday, and
  • qualifies as blind according to the Social Security Act, or
  • is entitled to SSI or SSDI because of their disability, or
  • has a disability included on the Social Security Administration’s (SSA’s) List of Compassionate Allowance Conditions, or
  • has a written diagnosis from a licensed physician who certifies that the person has a medically determinable physical or mental impairment which results in marked and severe functional limitations, that can be expected to last for at least a year or can cause death. This is the same standard used by the SSA to determine “disability.”

An ABLE account can be established by several different parties on behalf of a qualifying person with special needs. A parent or guardian or someone authorized by a power of attorney instrument can open the account designating the disabled person as beneficiary. In many cases, a person with special needs opens the ABLE account themselves.

Who Can Contribute Money Into an ABLE Account?

Anyone can contribute funds to an ABLE account for the benefit of the designated beneficiary. The contributions by others to the ABLE account is not tax deductible, but the person with special needs benefits greatly by having tax free money available to pay for needed goods and services.


Find out more about how New York ABLE Accounts work.
Contact Ely Rosenzveig and Associates at 1.914.816.2900
or email us at: [email protected]


Ely J Rosenzveig
Ely Rosenzveig

Ely J. Rosenzveig practices principally in the fields of elder law, trusts & estates, tax planning, employment law, and mediation. He has extensive experience in federal and New York State tax law, and has successfully represented a wide range of clients on FBAR & FATCA compliance issues. Ely also practices employment law, with a particular emphasis on age and disability discrimination, negotiating compensation agreements, and severance issues.

With his extensive background in the law, his experience as a congregational rabbi, and his specialized training in Mediation at Harvard Law School, Ely is also available as a professional mediator to help facilitate optimal solutions in matters ranging from family and estate disputes to multi-party commercial issues.