Colorado ABLE announced recently that a bill signed into law by Governor Jared Polis enacts significant improvements to Colorado’s Achieving A Better Life Experience (ABLE) accounts program, originally launched in 2017 within the Colorado Department of Higher Education.

A not-for-profit agency that receives no taxpayer funding, Colorado ABLE is Colorado’s savings program for people living with disabilities.

The Achieving A Better Life Experience (ABLE) Saving Accounts bill does away with one of the major disadvantages to the accounts, enhances the security of savings and provides additional tax benefits to the accounts for Coloradoans wanting to create sustainable financial independence.

The new law, which goes into effect January 1, 2023, ends the practice known as Medicaid clawback, which allowed the state to capture funds to reimburse certain Medicaid expenses, ultimately discouraging participation, after the death of the designated beneficiary.

It also provides a dollar-for-dollar state tax deduction for contributions made into a Colorado ABLE account, as well as allowing a person other than the individual with a disability to open and administer an ABLE account on behalf of the person with disabilities.

Federal legislation passed in 2014 was a valuable development in special needs planning. The federal ABLE Act allowed the states to offer ABLE accounts, creating the opportunity for individuals experiencing disabilities to build tax-advantaged savings without jeopardizing their eligibility for government benefits.

Virginia was the first state to approve and pass ABLE legislation after the passage of the federal ABLE Act. The ABLE Act was originally conceived of by a group of Virginia parents, and ABLEnow, the Virginia-sponsored ABLE program, is the country’s largest independent ABLE program.

How Do They Work?

ABLE accounts are similar to 529 college savings plans. Anyone can contribute to these accounts, which are controlled by the individual experiencing disabilities or their authorized representative, as long as the total for the year doesn’t exceed the limit.

Who is Eligible?

To open an ABLE account, an eligible individual must have developed a qualifying disability resulting in “significant functional limitations” before the age of 26. Proof of disability can be entitlement to benefits such as Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI), or self-certification based on a signed disability diagnosis from a qualified, licensed physician.

How Much Can You Contribute?

The annual contribution limit is $16,000, and total contribution limits vary by state. Designated beneficiaries who work may also contribute their earnings up to the federal poverty limit for a one-person household, with some restrictions. There isn’t an income limit to be able to contribute to an ABLE account.

How Can You Use the Money?

Money can be withdrawn tax-free from the account for almost anything benefiting the person with a disability. Qualified disability expenses range from housing, transportation, employment supports, continuing education to technology assistance and others. The money can be used for short-term expenses or invested and used for long-term goals. Receipts for qualifying expenses aren’t required for withdrawal, but the agencies report withdrawal amounts to the Internal Revenue Service and Social Security Administration, so records are encouraged in case of an audit or investigation.

How to Choose an Able Account

A majority of states now offer ABLE accounts, and many allow investment in any state’s plan regardless of state of residence. You may get a state income-tax deduction or tax credit if you contribute to your own state’s plan, such as in Colorado. Features vary from state to state, and you can compare state plans through the ABLE National Resource Center’s website.

Other resources:

Colorado ABLE


ABLE Accounts – Tax Benefit for People with Disabilities (IRS website)

Facts and resources provided are for informational purposes only. Rubi’s Positive Empowerment does not provide financial counseling or advice.