Pitfalls

You must spend any money you take out of your ABLE account on qualified disability expenses. If you spend it on expenses that don’t qualify, or if you just put the money in a different account, you may have to pay income tax on that amount, plus a 10% penalty, and this might affect Supplemental Security Income (SSI), or other benefits. Learn more about ABLE accounts.

There are two limits on how much can be put into your ABLE account each year, based on where the money comes from:

• Up to $18,000 from any source, including your family and friends, your benefits, and other unearned income, and
• Another $14,580 from your own earned income (if you have a job).
  • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

AZ ABLE will automatically stop accepting deposits for the rest of the year once $18,000 has been deposited in the account (unless you submit paperwork to deposit more than that amount), but not every state does this automatically, so you may need to keep a record of how much has been put into your ABLE account.

Learn more about ABLE accounts.

The type of funding an IDA program has will determine how it affects your benefits. Federally funded IDAs—those with block grants from Temporary Assistance for Needy Families (TANF) or the Assets for Independence Act (AFIA)—will not jeopardize your eligibility for benefits.

If you enroll in a non-federally funded IDA program, you could lose your Supplemental Security Income (SSI) benefits. If you enroll in a non-federally funded IDA program and have an approved Plan to Achieve Self-Support (PASS), however, you will not risk losing your benefits.

Before you enroll in an IDA program, be sure to find out what its funding source is and how that may affect your existing benefits.

To use PASS funds you must provide receipts to verify your expenses. Funds intended for a PASS must be deposited into a separate account. PASS money cannot be entered into an account that is used for personal expenses. Failure to use the funds as approved, or keep them separate from personal living expenses, could result in:

• A Supplemental Security Income (SSI) overpayment,
• Suspension of the PASS, and
• Putting future PASS participation at risk.

If you are on a limited income, do not pay someone to do your taxes. Use a Volunteer Income Tax Assistance (VITA) Center to file. Most centers can e-file your return for free.

To find a local VITA Center, check 2-1-1 Arizona or the IRS VITA Site List.

If you give money directly to a person who depends on public benefits programs, the assets you give them may mean that they are not able to get further benefits from the public programs they depend on. The use of an appropriate trust can help a person with disabilities have funds available for his or her benefit without the funds counting as a financial asset for benefits eligibility purposes.