What are ABLE accounts, who is eligible and more to know about tax-free savings plans

MADISON - Wisconsin is the only state that has not implemented an ABLE program, which provides tax-free savings accounts for people with disabilities, or tasked a government agency with helping people set up the accounts in other states.

A bill in the state legislature would let residents open accounts through Wisconsin and create a full-time position to educate residents about the program. It needs final approval from the Assembly before it heads to the governor, who is likely to sign it. From there, the accounts could be available through Wisconsin "within months" after the state joins a multi-state collaboration to offer the plans.

Currently, Wisconsinites can open accounts through other states, but only about 300 residents claimed deductions for those accounts on income taxes in recent years — marking about a 0.2% participation rate. That reflects low awareness about the program and a lack of confidence in out-of-state accounts, according to disability advocates, financial advisers and an attorney who spoke with the Milwaukee Journal Sentinel.

More: Wisconsin is an outlier on savings accounts for people with disabilities. That could soon change.

Advocates said having one source for ABLE information in Wisconsin could make it easier for those eligible to learn about and open accounts. If the bill is signed into law, the state Department of Financial Institutions would employ a full-time staff member to oversee ABLE in Wisconsin and provide education and outreach about the program.

Here's some basic information about ABLE accounts in Wisconsin and where you can find more resources.

What are ABLE accounts?

States began offering the savings accounts for people with disabilities after Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014.

The accounts have tax advantages — including a state income tax deduction in Wisconsin for what users put into the account, up to $17,000 per year. Money in the account accumulates tax-free.

The accounts are similar to college savings plans like Wisconsin's Edvest program, falling under the same 529 section of the tax code. Funds in a 529 college savings account can also roll over into an ABLE account.

Anyone can contribute funds to the account, including family, friends and employers.

Why do people use ABLE accounts?

ABLE accounts allow those eligible to save and invest money without losing access to federal benefits like Supplemental Security Income (SSI) and Medicaid, which provide monthly payments and health care coverage to people with disabilities or who are blind.

In order to stay eligible for those programs, assets like checking and savings accounts must total below $2,000. That limit has not been adjusted for inflation for more than three decades.

As a result, it is difficult for a person with a disability to accept a job offer or save enough to put a down payment on a house, for example, without going over the asset limit. ABLE accounts can be a "workaround," one advocate said.

Beneficiaries can then withdraw from their accounts for disability-related expenses. Those qualified expenses include education, housing, transportation, employment training, assistive technology and others.

Are the accounts available to Wisconsin residents?

While Wisconsin has not established its own program, residents can open accounts in other states. Most states accept out-of-state residents.

Four states have independent plans that are open to out-of-state residents: California, Massachusetts, Nebraska and Virginia.

More often, states are part of a multi-state collaboration. Those programs are typically open to out-of-state residents and normally have lower fees for participants.

How do I open an account in another state?

People with disabilities interested in opening an ABLE account can enroll online through state websites, rather than banks. Those official websites can be found on state-by-state comparison tools offered by the ABLE National Resource Center.

While ABLE accounts have become similar over time, people interested in the accounts may want to consider features like debit cards and customer service.

Who is eligible for an ABLE account?

People are eligible to open an ABLE account if their disability began before age 26. If the account opener receives SSI, they are already eligible, or they can file a certification signed by a physician.

Beginning in 2026, those diagnosed with a disability before age 46 will become eligible. The new age group is estimated to include more than 1 million veterans nationwide.

Is an ABLE account the only financial planning option available?

ABLE accounts are not an "end all, be all," one financial adviser told the Journal Sentinel, though the accounts are an important part of an estate and financial plan.

While ABLE accounts help manage day-to-day spending, another piece of the plan could be a special needs or pooled trust, which are set up by attorneys. People with disabilities and their families may want to contact a local aging and disability resource center to find the best options for them.

Both ABLE accounts and trusts protect eligibility for benefits. Trusts can be set up at any age. Larger sums, such as an inheritance that exceeds the annual limit on ABLE accounts, can go into trusts. And while amounts in an ABLE account may be returned to the government if the beneficiary dies, money in trusts can go toward other heirs.

More information on trusts can be found through Wispact, which manages special needs trusts for people with disabilities in Wisconsin. The ABLE National Resource Center and Special Needs Alliance also has a comparison chart here.

Will Wisconsin have its own ABLE program?

If the current bill passes the Assembly and the governor signs it, Wisconsin will likely join a multi-state collaboration that offers ABLE accounts, rather than establishing an independent program. That's the path that 36 states have followed.

The bill would also fund one position within the state Department of Financial Institutions, which would be responsible for overseeing the program and providing financial education resources to eligible Wisconsinites.

Where can I find more information?

Currently, no state agency in Wisconsin is formally tasked with helping residents open ABLE accounts. However, the state Department of Revenue has an FAQ page about the accounts and their tax benefits.

The ABLE National Resource Center also offers decision guides for comparing and opening accounts.

This article originally appeared on Milwaukee Journal Sentinel: What to know about ABLE accounts in Wisconsin