ABLE accounts give people with disabilities a way to save money without losing essential benefits like SSI and Medicaid. But there's an important catch: you need to use the funds for "qualified disability expenses" to keep the tax advantages and stay compliant.
In this article, we'll cover:
- What counts as a qualified disability expense
- Common expenses you can pay for with ABLE funds
- What you cannot use ABLE funds for
- Special rules for housing expenses
- How to document your ABLE spending
1. What Counts as a Qualified Disability Expense
The ABLE Act defines qualified disability expenses (QDEs) broadly. Any expense that helps maintain or improve your health, independence, or quality of life can qualify—as long as it relates to your disability.
The IRS gives ABLE account holders significant flexibility. The expense doesn't need to be exclusively for disability purposes; it just needs to relate to living with a disability.
Important: While the definition is broad, keeping records of your spending is essential. If the IRS ever questions a withdrawal, you'll need to show the expense was disability-related.
2. Common Expenses You Can Pay For
ABLE funds can cover a wide range of everyday costs. Here are the main categories:
Housing
- Rent or mortgage payments
- Property taxes and insurance
- Utilities (electricity, gas, water, internet)
- Home modifications (ramps, grab bars, wider doorways)
- Maintenance and repairs
Transportation
- Car payments, insurance, and registration
- Vehicle modifications for accessibility
- Gas and maintenance
- Public transit fares
- Rideshare services (Uber, Lyft)
Education
- Tuition and fees
- Books and supplies
- Tutoring services
- Educational technology
- Room and board while in school
Healthcare
- Health insurance premiums
- Copays and deductibles
- Prescription medications
- Therapy and counseling
- Dental and vision care
- Medical equipment
Employment support
- Job training and coaching
- Work-related transportation
- Uniforms or work clothing
- Professional certifications
- Assistive technology for work
Assistive technology
- Wheelchairs and mobility devices
- Hearing aids and cochlear implants
- Communication devices
- Adaptive computer equipment
- Smart home technology
Daily living expenses
- Groceries and food
- Clothing
- Personal care items
- Basic furnishings
Financial and legal services
- Financial planning fees
- Legal services related to disability
- Trust administration (if applicable)
- Tax preparation
3. What You Cannot Use ABLE Funds For
While the rules are flexible, some expenses don't qualify:
- Expenses for non-disabled family members – ABLE funds must benefit the account holder
- Investments or gambling – You can't use ABLE funds to buy stocks outside the account or gamble
- Gifts to others – The money must be spent on your own needs
- Expenses unrelated to disability – Purely recreational expenses with no disability connection may not qualify
Important: If you withdraw money for a non-qualified expense, that amount becomes taxable income and may incur a 10% penalty. It could also affect your benefits if it pushes you over resource limits.
4. Special Rules for Housing Expenses
Housing is one of the most common ABLE expenses, but SSI recipients need to understand a special rule.
When you use ABLE funds for housing costs, SSI counts that withdrawal as income for that month. This could temporarily reduce your SSI payment.
Housing expenses that trigger this rule include:
- Rent or mortgage
- Property taxes
- Utilities
- Home insurance
This doesn't mean you shouldn't use ABLE funds for housing—it's still a qualified expense. Just be aware that your SSI payment might be lower in months when you pay housing costs from your ABLE account.
Important: This housing rule only affects SSI recipients. If you receive SSDI only (not SSI), withdrawals for housing won't impact your benefits.
5. How to Document Your ABLE Spending
Good record-keeping protects you in case of questions from the IRS or benefit agencies.
For each ABLE withdrawal, keep:
- Receipts showing what you purchased
- Date of the expense
- Amount spent
- Category of expense (housing, transportation, etc.)
- Brief description of how it relates to your disability
You don't need to submit documentation with every withdrawal, but you should be able to produce it if asked. Many people keep a simple spreadsheet or folder of receipts organized by month.
How long to keep records: The IRS can audit returns for up to three years (or longer in some cases). Keep ABLE documentation for at least three years after the tax year of the withdrawal.
6. How Purple Helps You Manage Finances
With Purple, you can:
- Keep daily spending separate from your ABLE savings
- Track your spending by category to understand where money goes
- Receive benefits up to 4 days early with direct deposit
- Monitor your account balance to stay under SSI resource limits
- Avoid fees that reduce your limited income