ABLE (Achieving a Better Life Experience) accounts empower individuals with disabilities to save and spend funds without jeopardizing their eligibility for essential public benefits. These tax-advantaged savings accounts accept contributions from the account holder, as well as from family members, friends, and other individuals or entities, including trusts.
The funds held in an ABLE account can be used tax-free for a wide variety of Qualified Disability Expenses (QDEs). These expenses are broadly defined and can include many categories that support the health, independence, and quality of life of the account holder. While some expenses clearly qualify as QDEs, others may require a more careful assessment.
This guide will help you navigate the criteria for QDEs and provide clarity on how to determine whether a specific expense is eligible under ABLE account regulations.
Understanding Qualified Disability Expenses (QDEs)
The use of ABLE account funds is governed by Section 529A(e)(5) of the ABLE Act, codified in 26 U.S. Code § 529A(e)(5). While the Act permits the use of ABLE funds for any Qualified Disability Expense (QDE), it does not provide an exhaustive list. Instead, it outlines a range of allowable expense categories intended to enhance the quality of life, independence, and well-being of individuals with disabilities.
According to the law, QDEs include, but are not limited to, the following:
- Education
- Employment training and support
- Food
- Housing
- Transportation
- Assistive technology and personal support services
- Health
- Prevention and wellness
- Financial management and administrative services
- Expenses related to account oversight and monitoring
- Legal fees
- Funeral and burial costs
- Other expenses approved by the U.S. Department of the Treasury or the Internal Revenue Service (IRS)
Notably, proposed regulations introduced in 2015 expanded this list to include basic living expenses.
As Juliana Crist, Senior Consultant at AKF Consulting, notes:
“There is no complete list of QDEs, but the category is very broad, including any expense paid for the benefit of the eligible beneficiary.”
This broad interpretation exists because the statute defers detailed definitions to the IRS, which retains discretion to determine whether specific expenses qualify. Occasionally, the IRS or the Social Security Administration (SSA) will issue clarifying guidance. For example, as of 2023, the SSA has officially confirmed that food is considered a QDE.
Understanding what constitutes a qualified expense is essential for maximizing the benefits of an ABLE account while maintaining compliance with federal regulations. This guide aims to help you navigate these categories and make informed decisions.
What Qualifies as an Eligible Expense?
The official guidance on Qualified Disability Expenses (QDEs) emphasizes that the term should be interpreted broadly. Specifically, QDEs are defined to include basic living expenses and are not limited to costs that are medically necessary or that benefit only the ABLE account holder. This expansive interpretation allows for a wide range of spending options—including modern necessities such as smartphones and tablets—so long as the expense supports the individual’s health, independence, or quality of life.
When evaluating whether a particular expense qualifies, the first step is to reference the established categories recognized by the IRS, as outlined earlier. If an expense clearly falls within one of these areas, it can confidently be considered a QDE.
For expenses that fall into a gray area or don’t fit neatly within the standard categories, it’s wise to consult reliable resources. The ABLE National Resource Center offers detailed guides to help account holders determine whether various types of spending are eligible. These resources address common and specialized expenses, such as:
- Educational costs
- Rent or mortgage payments
- Assistive technology and related services
- Vehicle purchases
- COVID-19 related supplies
- Day-to-day living expenses, including food
- Costs related to managing and maintaining an ABLE account
By using these tools and remaining informed, account holders and their families can make confident, compliant financial decisions while maximizing the full potential of ABLE accounts.
Tips for Using Your ABLE Account Wisely
Beyond the general guidance provided by the IRS and the Social Security Administration (SSA), there are several practical considerations to keep in mind when managing and spending from your ABLE account. These tips can help ensure compliance while maximizing the value of your savings.
1. Focus on the Purpose, Not Just the Disability
An expense does not need to be directly related to a medical condition to qualify as a Qualified Disability Expense (QDE). If it falls within one of the approved categories—such as food, housing, transportation, or education—it can be paid for with ABLE funds. Everyday necessities, including groceries and over-the-counter medical supplies, are acceptable QDEs if they benefit the account holder.
2. When in Doubt, Use Non-ABLE Funds
If you’re uncertain whether a purchase qualifies as a QDE, it’s best to use non-ABLE funds for that expense. Reserve your ABLE account for clearly eligible costs, such as rent or utility bills, which may, in turn, free up other resources for discretionary or questionable purchases.
3. Coordinate with Other Assistance Programs
Make use of other government support programs wherever possible. For instance, if you qualify for Supplemental Nutrition Assistance Program (SNAP) benefits to cover food costs, you can preserve your ABLE funds for non-covered necessities like assistive technology or transportation.
4. Keep Detailed Records
Maintaining documentation for all ABLE-related expenditures is crucial, especially for any expenses that might be considered ambiguous. If the IRS ever questions a transaction, being able to provide receipts, descriptions, or notes explaining how the purchase supports your well-being can help justify the use of funds.
5. Understand the Penalties for Non-Qualified Spending
Using ABLE funds for non-qualified expenses can trigger tax consequences. According to Juliana Crist, Senior Consultant at AKF Consulting, account holders must self-report any non-qualified distributions on their annual tax return. The earnings portion of such distributions is subject to income tax and a 10% penalty.
While the IRS generally only investigates QDE determinations in the event of a standard audit, it’s important to be cautious and proactive. Proper planning and recordkeeping can help ensure your ABLE account remains a secure and compliant financial tool.
Fequently Asked Questions
What is an ABLE account?
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account for individuals with disabilities. It allows account holders to save money without affecting eligibility for federal benefits such as SSI or Medicaid.
Who is eligible to open an ABLE account?
To open an ABLE account, the individual must have a qualifying disability that began before age 26 (changing to 46 starting in 2026). The individual must also meet SSI or SSDI criteria or self-certify their eligibility based on a qualified diagnosis.
What are Qualified Disability Expenses (QDEs)?
QDEs are expenses related to the health, well-being, or independence of the account holder. They include a wide range of categories such as education, housing, food, transportation, assistive technology, health care, and more.
Do QDEs have to be medically necessary?
No. QDEs do not need to be medically necessary. The law intentionally defines them broadly to include basic living expenses that benefit the eligible individual.
Can I use ABLE funds for rent or housing costs?
Yes, housing expenses such as rent, utilities, or mortgage payments are qualified uses of ABLE funds. Just ensure you follow SSI timing rules if you’re receiving housing support through other benefits.
Can I spend ABLE funds on food or groceries?
Yes. The SSA has confirmed that food-related purchases, including groceries, restaurant meals, takeout, and delivery services, qualify as QDEs.
Conclusion
ABLE accounts are a powerful financial tool that empower individuals with disabilities to save and spend money without jeopardizing access to essential public benefits. By understanding what qualifies as a Qualified Disability Expense (QDE), account holders can make informed decisions that support their health, independence, and overall quality of life.
While the IRS provides broad categories to guide eligible spending, it’s important to keep detailed records and seek guidance when necessary. Whether you’re using ABLE funds for daily living, education, housing, or even a well-earned vacation, the flexibility of these accounts offers peace of mind and financial freedom.
