ABLE accounts enable people with disabilities to save money and secure their entitlement to public benefits. An ABLE account is accessible to the account owner, their friends and family members as well as anyone else (trusts included) who can make contributions. You have the option of keeping this money tax-exempt or using it for eligible expenses.
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Qualified Disability Expenses (QDEs), which qualify for ABLE benefits, cover a wide range of items. Determining if an expense qualifies as a QDE may not be straightforward; in some cases it could even be more complex. This guide will assist you in making that determination.
Acquaintance With Qualified Disability Expenses
Are you familiar with qualified disability expenses? Here’s some information that may help. Section 529A(e)(5) of the ABLE Act, 26 U.S. Code 539.A(e),(5), sets out the official rules for ABLE accounts. While it states that your ABLE account can be used for qualified disability expenses (QDEs), it does not provide a comprehensive list; rather, the law lists expenses which could qualify as QDEs.
They include, but are not limited to:
- Support and training for employment
- Assistive technology/personal support services
- Prevention and Wellness
- Administrative and financial services
- ABLE account monitoring/oversight expenses
- Legal fees.
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Funeral and burial
Other expenses approved by U.S. Treasury Department/IRS regulations in 2015.3 Proposed regulations added basic living expenses to this listing in 2015.
Juliana Crist is a senior consultant at AKF Consulting and advises state-run municipal plans. “There isn’t an exhaustive list of QDEs,” she notes, noting that the category is quite broad. As the law does not specify every expense you can use your ABLE account for, the IRS ultimately makes the final determination as to what counts as permissible use. Occasionally, either the Social Security Administration (SSA) or IRS will issue guidance clarifying whether certain items qualify as QDEs; for instance, in 2022 the SSA confirmed that food counts as a QDE.
What Qualifies as an Eligible Expense?
QDEs are clearly defined in the guidance document, which stipulates that expenses can be used for any reason.
To determine if an expense is a QDE, first review the above list. If it falls within one of these categories, then it is likely an eligible expense for QDE treatment.
Unsure of some expenses? The ABLE National Resource Center has a list of guides to assist you. These documents offer details on numerous costs.
- Rent and mortgage payments
- Assistive technology (AT) purchases
- Vehicle supply for COVID-19
- Day-to-day living expenses, including food supplies
- Manage Your ABLE Account
Tips on Utilizing Your ABLE Account
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When managing your ABLE account, there are a few essentials to remember.
Housing expenses like rent, mortgage, utilities, trash pickup and real estate taxes don’t need to be linked to a disability if they fall within QDE categories.
You can use non-ABLE money to cover items you are uncertain of and save your ABLE funds for covered costs. For instance, using your ABLE funds for rent payment would free up non-ABLE funds for other expenses.
Wherever possible, utilize public funds. Medicaid might cover transportation costs to a doctor’s appointment, special education programs or computer equipment that needs adaptations. When public benefits cannot cover something you need, ABLE funds may provide relief and cover what public benefits cannot.
Keep records of any expense you are uncertain about. The IRS will likely contact you if you use your ABLE account to pay for an ineligible expense, so be prepared to explain why that particular expense wasn’t a QDE. Keeping detailed records will make this process much smoother.
Can I Use My ABLE Account to Rent Property?
Yes, you can use money from your ABLE account to cover housing expenses. In order to remain eligible for Supplemental Security Income (SSI), the money must be used within one month of withdrawal to ensure it does not affect SSI eligibility. Having an ABLE account also does not impact Section 8.9 housing benefits in any way.
Can an ABLE account be used for food purchases?
Yes. An ABLE account can be used to pay for groceries, food delivery and restaurant meals. Recent SSA confirmations confirm that food is considered a qualifying dining expense (QDE).
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Can an ABLE account be utilized for a vacation?
Yes. A vacation can be taken by those with disabilities if it helps enhance their quality of life, independence and health.