I need to start this section with a caveat. I have no professional expertise with Achieving a Better Life Experience (529A ABLE) accounts. My experience is limited to one Explorer has a Minnesota ABLE account. I’m writing what I believe to be true, but don’t cite me to the IRS if they question anything. If you have doubts please consult a local expert!
Now that you’ve been warned, this is what we believe.
Most Explorers who receive Social Security Income (SSI) have effective caps on how much they can save outside of an ABLE account. Saving money to buy an iPhone, for example, may push them over a savings limit. On the other hand, buying on an installment plan may be difficult or complex.
With an ABLE account they can save more money. Money in ABLE accounts can be spent without penalty on qualified expenses. The 2015 Federal Register 529A guidance says “expenses for common items such as smart phones could be considered qualified disability expenses if they are an effective and safe communication or navigation aid for a child with autism”.
For an Explorer who has an SSI savings limit an ABLE account can be a good way to purchase an iPhone and related accessories. I have not seen any documentation of how often an Explorer can use ABLE account money to purchase an iPhone or if ABLE money can be used for repairs or maintenance. We use our iPhones for 3-5 years unless a device is lost or broken.
Can an ABLE account be used to pay for a monthly mobile plan? IRS 27_IRB suggests it can: “Example. B, an individual, has a medically determined mental impairment that causes marked and severe limitations on her ability to navigate and communicate. A smart phone would enable B to navigate and communicate more safely and effectively, thereby helping her to maintain her independence and to improve her quality of life. Therefore, the expense of buying, using, and maintaining a smart phone that is used by B would be considered a qualified disability expense.”
Can an ABLE account be used to pay for Apple’s “new iPhone every year” iPhone Upgrade Program? How about buying a used iPhone? What about trading in an older iPhone for a new one? Purchasing Apple Care? Selling a used ABLE funded iPhone? Can an ABLE plan pay for an Explorer’s portion of a family mobile plan?
These are great questions … for a specialist tax accountant! I’ll have to leave them as open questions for now. I suspect doing a trade-in for a 2-3yo old ABLE purchased iPhone is safer than selling it. I think buying a used iPhone from a vendor would be fine, but I would not use ABLE money to buy a used iPhone from an individual.
For many if not most Explorers an ABLE plan seems to be the best way to pay for an Explorer’s iPhone and data plan.