Bridges Resource Library

Benefits of ABLE Accounts

Updated as of May 18, 2024.

Savings Without the Loss of SSI and Other Benefits

There are very specific rules for SSI eligibility regarding both income and resources. Distributions from ABLE accounts are generally excluded for SSI income, and funds in ABLE accounts (up to $100,000) are generally excluded from SSI resource limits.

For more information, please access the Income Limits for SSI Eligibility and Limitations on Resources for SSI Eligibility Bridges Resource Library entries.

Tax-free Earnings and Distributions

ABLE accounts can be invested and earn interest, dividends, and capital gains on those investments. Typically, these funds would be subject to income taxes the year they occur. In ABLE accounts, those earnings are not taxed as they are earned; they grow tax-free. When you take money out of the ABLE account, there will be no tax as long as the distributions are used for Qualified Disability Expenses (QDE).  

Gifts Made to the ABLE Account are Not Included as Income for SSI

Income (both earned and unearned) can adversely impact an individual’s SSI eligibility. Even gifts for birthdays, graduation, etc. can reduce or eliminate your monthly SSI payment in the month you receive them. However, gifts made directly to an ABLE account are not considered income. Thus, you might choose to ask that cash gifts be made directly to your ABLE account (and cannot exceed the annual contribution limit for the ABLE Account owner.

In fact, the Maryland ABLE program allows you to create a “gifting page” for electronic gifts and also provides an option for mail-in gifts to go to a specific ABLE account. Both annual contribution limits ($18,000 in 2024) and total account limits ($100,000) for SSI eligibility still apply, but any person may make a contribution to an individual’s ABLE account, no matter what state the gift-giver lives in. However, the gift must be made directly to the ABLE account.

Contributions Tax Benefits in Some States

As a bonus, many states provide some level of tax deduction for people contributing to ABLE accounts. In Maryland, each ABLE account contributor may deduct up to $2,500 from Maryland taxes (couples may deduct up to $5,000 in contributions) for each ABLE account. In other words, if one person contributes $2,500 to four different ABLE accounts, that person would be able to deduct $10,000 from income for Maryland taxes that year.

Note that state tax deductions may not be available if the contributor is not a resident of the state where the ABLE is held. Also, on the federal level, there are no tax deductions or tax credits available for contributions to ABLE accounts.

Not Included on Your FAFSA

ABLE account funds are not counted on your FAFSA (Free Application for Federal Student Aid). This is a significant benefit and can increase the chances that the ABLE account owner will qualify for financial aid.

In contrast, “529 plans,” popular savings plans for college not tied to disability ARE counted in determining eligibility for financial aid. If desired, 529 plans can be “rolled over” into an ABLE account, so long as the annual contribution limit ($18,000 in 2024) is not exceeded.

More About ABLE Accounts

Comprehensive post: All About ABLE Accounts

Individual topics

Contact the Bridges Helpdesk for More Information

This unique project is being coordinated through The IMAGE Center of Maryland, a center for independent living in Towson, and it is funded by a grant from the Maryland Department of Education Division of Special Education/Early Intervention Services.

Leave a Reply

Your email address will not be published. Required fields are marked *