An ABLE (Achieving a Better Life Experience) account empowers individuals with disabilities to save and manage funds without jeopardizing their eligibility for essential public benefits such as Medicaid or Supplemental Security Income (SSI). These tax-advantaged savings accounts can receive contributions from the account holder, family members, friends, and even organizations or trusts. The funds can grow tax-free and be used for a wide variety of expenses that enhance the quality of life for the beneficiary.
These expenses are known as Qualified Disability Expenses (QDEs) and may include costs related to education, housing, transportation, employment training, healthcare, and more. While some expenses clearly meet the criteria, others may require careful evaluation. This guide will help clarify what qualifies and how to make informed decisions about ABLE account spending.
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Key Takeaways
- ABLE account funds can be used for a wide range of Qualified Disability Expenses (QDEs).
- QDEs encompass costs such as education, employment training and support, food, housing, transportation, assistive technology, personal support services, healthcare, wellness, financial and administrative services, legal fees, and funeral or burial expenses.
- While an expense does not always need to be directly related to the individual’s disability, it must align with one of the approved categories. It is essential to maintain thorough records of all ABLE account expenditures for compliance and future reference.
Understanding Qualified Disability Expenses (QDEs)
The guidelines for ABLE accounts are outlined in Section 529A(e)(5) of the ABLE Act, 26 U.S. Code 529A(e)(5). While the Act permits the use of ABLE funds for “qualified disability expenses” (QDEs), it does not provide a comprehensive list of what qualifies as a QDE. Instead, it offers a general framework of categories under which expenses may be considered eligible.
Some examples of QDEs include, but are not limited to:
- Education
- Employment training and support
- Food
- Housing
- Transportation
- Assistive technology and personal support services
- Health and wellness
- Financial management and administrative services
- ABLE account oversight and monitoring
- Legal fees
- Funeral and burial expenses
- Other expenses approved by the U.S. Treasury Department or IRS (such as basic living expenses, as proposed in 2015)
“There is no exhaustive list of QDEs, but the category is quite broad and includes any expense that benefits the eligible beneficiary,” explains Juliana Crist, senior consultant at AKF Consulting. The law leaves it to the IRS to determine specific expenses that qualify. From time to time, the IRS or the Social Security Administration (SSA) issues clarifications on what constitutes a QDE. For example, as of 2023, the SSA confirmed that food is an eligible QDE.
What Qualifies as an Eligible Expense?
The official guidance on Qualified Disability Expenses (QDEs) emphasizes a flexible, inclusive interpretation. According to the IRS, QDEs should be “broadly construed to permit the inclusion of basic living expenses” and are not limited to items that are medically necessary or that benefit only the account holder. This means that many everyday purchases—such as smartphones, tablets, and other personal-use items—can qualify, provided they support the well-being or independence of the eligible individual.
When evaluating whether an expense is a QDE, start by referring to the established categories recognized by the IRS. If your expense clearly fits into one of these—like housing, transportation, or education—it is considered eligible.
For less obvious items, consult resources from the ABLE National Resource Center. Their detailed guides provide examples and clarification across a wide range of spending areas, including:
- Education
- Rent or mortgage payments
- Assistive technology
- Vehicle purchases
- COVID-19-related supplies
- Daily living costs such as groceries
- Costs associated with managing the ABLE account
When in doubt, maintaining documentation and aligning your purchase with the purpose of supporting the beneficiary’s health, independence, or quality of life is key.
Tips on Using Your ABLE Account Wisely
Beyond IRS and SSA guidelines, managing your ABLE account effectively requires strategic planning and documentation. Here are key practices to help you make the most of your account:
- QDEs Don’t Have to Be Disability-Specific: An expense only needs to fall within a qualified category—it doesn’t have to be directly tied to a medical condition. This includes common costs like food, housing, education, and medical supplies.
- When in Doubt, Use Non-ABLE Funds: If you’re uncertain whether an expense qualifies, consider covering it with non-ABLE money. Use your ABLE funds for expenses clearly recognized as QDEs, such as rent or transportation.
- Leverage Other Benefits First: Take advantage of government programs like SNAP for food or Medicaid for healthcare. Reserve ABLE funds for essentials not covered by those services.
- Keep Thorough Records: For any potentially questionable expense, maintain receipts and notes explaining how the purchase supports the beneficiary’s quality of life. This documentation will be helpful if the IRS ever raises concerns.
- Know the Consequences of Misuse: Using ABLE funds for non-qualified expenses requires self-reporting. You’ll owe income tax and a 10% penalty on the earnings portion of that distribution. While the IRS typically investigates only during an audit, it’s wise to be cautious and proactive.
Staying informed and organized helps ensure you maximize your ABLE account while avoiding penalties.
Can I Use My ABLE Account for Rent?
Yes, you can use your ABLE account to pay for housing expenses, including rent paid directly to a landlord. Housing is a qualified disability expense (QDE) under IRS guidelines, making it an approved and appropriate use of ABLE funds.However, timing is important—especially if you receive Supplemental Security Income (SSI).
To avoid impacting your SSI benefits, any ABLE funds withdrawn for rent should be spent within the same calendar month. Delays in using the funds could affect how the Social Security Administration treats the distribution.Additionally, holding an ABLE account does not affect eligibility for housing assistance programs like Section 8, providing even greater financial flexibility while maintaining access to public benefits.
Can an ABLE Account Be Used for Food?
Yes, food is considered a qualified disability expense (QDE), and ABLE account funds can be used to pay for it. This includes groceries, restaurant meals, takeout, and food delivery services. The Social Security Administration (SSA) has officially confirmed that food falls under the broad category of basic living expenses, making it an approved use of ABLE funds.
There’s no requirement for the food to be medically prescribed or tied to a disability—if it supports the beneficiary’s well-being and daily living, it qualifies. As always, it’s wise to keep receipts or records of your food-related purchases in case you need to verify how your ABLE funds were used.
Can an ABLE Account Be Used for a Vacation?
Yes, you can use your ABLE account to pay for a vacation, as long as the trip supports the beneficiary’s health, independence, or quality of life. Travel expenses—such as transportation, lodging, meals, and related costs—can qualify as Qualified Disability Expenses (QDEs) under the ABLE Act.
The key is demonstrating how the vacation contributes to the well-being of the account holder. For example, a relaxing getaway that reduces stress, a family trip that supports social engagement, or travel to attend a therapeutic program may all be considered appropriate uses.Be sure to keep receipts and records, especially if the expense might not clearly appear disability-related.
Frequently Asked Questions
What is an ABLE account?
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account designed for individuals with disabilities. It allows account owners to save and spend money on qualified disability expenses (QDEs) without affecting their eligibility for certain public benefits like Supplemental Security Income (SSI).
What qualifies as a Qualified Disability Expense (QDE)?
A QDE is any expense that supports the health, independence, or quality of life of the account holder. Examples include education, housing, transportation, food, medical supplies, and assistive technology. The list of QDEs is broad and flexible, allowing for various personal and living expenses.
Can ABLE account funds be used for rent?
Yes, ABLE account funds can be used to pay rent, as housing is a recognized QDE. However, if you receive SSI, it’s important to use the ABLE funds within the same month they are withdrawn to avoid affecting your SSI eligibility.
Can ABLE account funds be used for food?
Yes, food is a qualified expense under ABLE accounts. You can use the funds for groceries, meals at restaurants, takeout, and food delivery services. The Social Security Administration (SSA) has confirmed that food qualifies as a QDE.
Can I use my ABLE account for a vacation?
Yes, you can use ABLE funds for a vacation if it benefits your health, independence, or quality of life. This includes expenses such as transportation, lodging, and meals for the vacation. Be sure to keep documentation showing how the vacation supports the beneficiary’s well-being.
Does an expense have to be disability-related to qualify?
No, an expense does not need to be directly disability-related, as long as it falls within the categories of QDEs. For instance, basic living expenses like food, housing, and transportation can be covered even if they are not specifically disability-related.
Conclusion
An ABLE account is a powerful tool for individuals with disabilities, offering financial flexibility while protecting access to essential public benefits. With the broad range of Qualified Disability Expenses (QDEs) available, ABLE account holders can use their funds for various needs—ranging from basic living expenses like food and housing to health-related costs and educational support.