facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
What Can ABLE Account Money Be Spent On? Thumbnail

What Can ABLE Account Money Be Spent On?

What Is an ABLE Account?

ABLE (Achieving a Better Life Experience) accounts offer people with disabilities a great, tax-free way to accumulate money without jeopardizing their qualifications for Supplemental Security Income (SSI) and other means-tested programs. Withdrawals are tax-free as long as the money is used for “qualified disability expenses.”  

The arguments for starting and maintaining such funds are overwhelming, not least of which is the wide variety of things on which the money can be spent.

To build 529A ABLE accounts, beneficiaries (and other contributors) can put up to $17,000 total into these funds each year (in 2023). Only those whose disabilities were diagnosed before turning 26 are eligible for an ABLE savings plan today. This will change to age 46 starting in 2026.

The total value of the account must remain below $100,000 for the beneficiary to qualify for means-tested government benefits. Also, in order to avoid taxes and other penalties on the earnings generated, the money must be spent only on items, services and activities that the Internal Revenue Service (IRS) deems qualified disability expenses (QDEs).

Qualified Disability Expenses (QDEs)

The ABLE Act, passed by Congress in 2014, originally defined QDEs as:

  • education, housing, transportation
  • employment training and support
  • assistive technology and personal support services
  • health, prevention, and wellness
  • financial management and administrative services
  • legal fees
  • expenses for oversight and monitoring
  • funeral and burial expenses

The language of the Act concludes this list with: “and other expenses which are approved by the Secretary under regulations and consistent with the purposes of this section.”

Subsequent regulations and recent revisions by the Social Security Administration (SSA) and the IRS have expanded the list. As of 2022, for instance, the SSA has determined that food qualifies as a QDE, whether in the form of groceries or restaurant meals. ABLE money can also go toward other common expenses that increase and/or maintain one’s health, independence, and/or quality of life. This can include things like services, supplies,  vacations or even smart phones if  the smart phone is an effective and safe communication or navigation aid. 

The Purpose of ABLE Accounts

To clarify the purpose of ABLE accounts, the Treasury Department and IRS issued a bulletin in 2015 to the effect that “qualifying disability expenses” should be “broadly construed” to include any benefit related to the designated beneficiary “in maintaining or improving his or her health, independence, or quality of life.”

“There is no complete list of QDEs, but the category is very broad, including any expense paid for the benefit of the eligible beneficiary,” Juliana Crist, senior consultant at AKF Consulting, an advisor to state-run municipal plans, told Investopedia.

More Advice on ABLE Account Spending

The ABLE National Resource Center offers advice on what to spend ABLE funds on and when, stressing that an expenditure need not be disability related. Need a car? That’s eligible, as is a smartphone. As noted above, education qualifies, as does anything needed for classes, such as books and a laptop.

It is always best to use ABLE funds on those things that are explicitly described as QDEs, while using money from other sources for those things that might not qualify. The ABLE National Resource Center advises using public benefits for key expenditures, reserving ABLE funds for those things less likely to be covered by such things as Medicaid.

Experts advise keeping records on what you have spent ABLE funds, should the IRS decide to include you on one of its random audits. Misuse of ABLE account funds could result in tax penalties and possible loss of public benefits.

But the rationale for starting and building an ABLE account is compelling — and keeping the account growing more so, as more items are included in allowable expenditures. Before you open an ABLE account for yourself or a family member with disabilities, or if you have questions on how the money should be spent, be sure to consult with your Van Hulzen Financial Advisor.

*The foregoing content reflects the opinions of Van Hulzen Asset Management DBA "Van Hulzen Financial Advisors" and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.