If you’re wondering, “Are Veterans Affairs Benefits Taxable” this high-value blog post has everything you need to know!
In accordance with 26 U.S. Code § 104, VA benefits payments are not considered income and therefore are not taxable at the state or federal level.
Disabled veterans do not need to claim any payments received from the VA on their state or federal tax returns.
Why?
Because it’s not income!
Finally, all VA benefits payments, such as disability compensation, education benefits, individual unemployability, special monthly compensation, pension payments, aid and attendance, and grants for home modifications, are not taxable.
Are Veterans Affairs Benefits Taxable?
Veterans Affairs benefits payments received, such as disability compensation, education benefits, individual unemployability, special monthly compensation, pension payments, aid and attendance, and grants for home modifications, are not taxable.
IRS Publication 907, Tax Highlights for Persons With Disabilities, explains the rules in more detail.
Disabled veterans do not need to include disability benefits received from VA in your gross income calculations.
In addition, do not include in your income any veterans’ benefits paid under any law, regulation, or administrative practice administered by the VA.
Veterans Affairs benefits programs that are IRS tax-exempt include:
- Disability compensation and pension payments for disabilities paid to veterans or their families
- Education, training, and subsistence allowances
- Grants for homes designed for wheelchair living
- Grants for motor vehicles for veterans who lost their sight or the use of their limbs
- Veterans’ insurance proceeds and dividends paid to veterans or their beneficiaries, including the proceeds of a veteran’s endowment policy paid before death
- Interest on insurance dividends left on deposit with the VA
- Benefits under a dependent-care assistance program
- The death gratuity paid to a survivor of a member of the U.S. Armed Forces who died after September 10, 2001
- Payments made under the VA’s compensated work therapy program
Is VA Disability Considered Income?
VA disability compensation payments are not considered income.
Because VA disability payments are not considered income, they are not taxable.
This is an insanely awesome benefit for U.S. military veterans and their families.
Do I Have to Report VA Disability on My Tax Return?
No, you do not need to report VA disability compensation payments received on either your state or federal tax return.
Why?
Because VA disability benefits are not taxable income for state or federal income tax purposes.
Is VA Disability Income Taxable by State?
As of this writing, VA disability income is not taxable by any U.S. state.
It doesn’t matter what your VA disability rating is or how much benefit you receive; none of it is taxable!
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YOU SERVED! YOU DESERVE! Fellow Veterans … Read That Again.
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About the Author
Brian Reese
Brian Reese is one of the top VA disability benefits experts in the world and bestselling author of You Deserve It: The Definitive Guide to Getting the Veteran Benefits You’ve Earned (Second Edition).
Brian’s frustration with the VA claim process led him to create VA Claims Insider, which provides disabled veterans with tips, strategies, and lessons learned to win their VA disability compensation claim, faster, even if they’ve already filed, been denied, gave up, or don’t know where to start.
As the founder of VA Claims Insider and CEO of Military Disability Made Easy, he has helped serve more than 10 million military members and veterans since 2013 through free online educational resources.
He is a former active duty Air Force officer with extensive experience leading hundreds of individuals and multi-functional teams in challenging international environments, including a combat tour to Afghanistan in 2011 supporting Operation ENDURING FREEDOM.
Brian is a Distinguished Graduate of Management from the United States Air Force Academy, Colorado Springs, CO, and he holds an MBA from Oklahoma State University’s Spears School of Business, Stillwater, OK, where he was a National Honor Scholar (Top 1% of Graduate School class).
