Do I have to pay taxes on my account?
No. If the money in your ABLE account is used to pay for qualified expenses, it won’t be counted as income for your state or federal taxes.
The definition of a qualified expense for ABLE is broad, inclusive of anything that impacts the person with a disability’s health, independence and quality of life. Some of the most common qualified expenses as defined by the IRS include:
Living expenses
Employment, training and support
Assistive technology
Education
In the unlikely event that a purchase isn’t a qualified expense, you’ll have to pay state and federal taxes, plus a 10% federal tax penalty on any earnings used to pay for ineligible items. Also, keep in mind that any non-qualified withdrawals are considered income for the month and could count against your eligibility for Supplemental Security Income (SSI) benefits or Medicaid.
