Determining Whether Something is a Qualified Disability Expense (QDE)

Section 529A(e)(5) of the ABLE Act, 26 US Code 529A(e)(5), provides a list of expenses that would be considered QDEs, including, but not limited to:

• Education
• Employment training and support
• Food (as clarified by SSA) https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740
• Housing
• Transportation
• Assistive technology and personal support services
• Health, prevention and wellness
• Financial management and administrative services
• Expenses for ABLE account oversight and monitoring
• Legal fees
• Funeral and burial
• Self-employment expenses: How can I use my ABLE account to start or grow my business? A SSI beneficiary may find it difficult to save for all ongoing business expenses without going over their $2,000 countable resource limit. Money may be saved in an ABLE account to pay for quarterly income taxes, a lease, rent or for other business-related expenses. Best practice: save for business expenses with a business checking account and pay for expenses each month. Expenses that can only be paid quarterly or annually (that will likely be more than the $2,000 resource limit, may be saved for within ABLE.) This allows room for some ABLE savings to be saved long term. Selecting an ABLE investment option may allow for tax-free investment growth too. Pay for qualified disability expenses directly from the ABLE account and keep receipts for at least three tax seasons.

See Qualified Disability Expense Fundamentals (12/13/18, archived webinar), https://www.ablenrc.org/wp-content/uploads/2019/07/ABLE-QDE-Fundamentals-ANRC-Webinar_1.pdf; ABLE Case Summary 4: ABLE Accounts and Qualified Disability Expenses: Expenses That Do or Do Not Meet QDE Criteria, https://www.ablenrc.org/wp-content/uploads/2019/07/4-ABLE-and-Qualified-Disability-Expenses_0.pdf.

For example, payments for general education/training (college or vocational school tuition as a QDE) and housing expenses (such as rent or mortgage, utilities, trash removal, real property taxes) are QDE categories that do not need a connection to the disability. The repayment of an overpayment of Supplemental Security Income or Social Security Disability Insurance benefits would be a QDE; these overpayments fall under the category of “financial management” in IRS rules

For example, while good arguments can be made for things like the cost of transportation to a casino (but not the cost of gambling) for a relaxing evening with friends, this may raise questions by the IRS. It would be better to use non-ABLE funds for transportation to a casino. ABLE funds may be used for rent (housing QDE) or a telephone or cell phone (basic living expense QDE), for example, freeing up other money for the non-ABLE QDE expense.

For example: Medicaid may be able to pay for transportation costs to a health care provider (health, prevention, and wellness QDE); a special education program or state vocational rehabilitation agency may be able to pay for specially adapted computer equipment or a basic laptop or tablet for the person with a disability (assistive technology or education-related QDE); or a Medicaid waiver program may be able to cover the costs of adaptations to a bathroom to make it accessible to a wheelchair user (housing or assistive technology QDE.) When the public benefit program can pay for an expense, it frees up precious ABLE account funds to be used for items that public benefits programs cannot fund or are less likely to fund.

This is because ABLE accounts are still very new and benefit program staff may not be aware of their own agency’s ABLE account guidance. See Decision Guide, Understanding the Impact of an ABLE Account on Various Public Benefits, regarding federal policies for SSI and Medicaid, for example, providing that ABLE account distributions for QDEs are not counted as income.} See ABLE Federal statements from IRS, SSA, CMS / Medicaid & Medicare, HUD / Section 8, USDA / SNAP: https://www.ablenrc.org/what-is-able/federal-guidance/.