This is a question many veterans and their families have—whether they’re preparing their taxes, involved in legal proceedings, or just curious about the impact of receiving VA disability pay on their income and tax status: “Is VA disability considered income?”
You may also want to know which is any VA benefits, dependent benefits, or survivor benefits are taxable.
Let’s dive right in with some answers to these questions!
- When Do VA Benefits Not Count As Income?
- Are VA Survivors Benefits Taxable?
- Is VA Dependency and Indemnity Compensation Taxable?
- Will Va Benefits Reduce My Unemployment?
- VA Ask a queseion for the Veterans Affairs
- Top 25 Disabled Veteran Benefits (You Might Not Know About!)
- Need more help figuring out how to get the benefits and compensation owed to you?
- About the Author
When Do VA Benefits Not Count As Income?
The IRS defines Gross Income in Section 61 as: Compensation for services, including fees, commissions, and similar items.
According to the IRS, disability benefits received from the VA should not be included in your reported gross income and are not taxable at the federal level.
Payments that are considered disability benefits include:
- Disability compensation and pension payments for disabilities paid either to veterans or their families
- Grants for homes designed for wheelchair living
- Grants for motor vehicles for veterans who lost their sight or the use of their limbs
- Benefits under a dependent-care assistance program
- Education, training, and subsistence allowances
- Veterans’ insurance proceeds and dividends paid either 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 Armed Forces who died after September 10, 2001
- Payments made under the compensated work therapy program
- Any bonus payment by a state or political subdivision because of service in a combat zone
Currently, VA disability payments also are tax-free in all states, although it’s always a good idea to double-check your state income tax code.
Are VA Survivors Benefits Taxable?
A VA Survivors Pension offers monthly payments to qualified (un-remarried) surviving spouses and unmarried dependent children of deceased wartime veterans who meet certain income and net worth limits set by Congress.
The VA Survivors Pension, which was formerly referred to as the Death Pension, is a tax-free benefit.
Is VA Dependency and Indemnity Compensation Taxable?
The surviving spouse, child, or parent of a service member who died in the line of duty, or the survivor of a veteran who died from a service-related injury or illness, may be able to get a benefit called VA Dependency and Indemnity Compensation (VA DIC).
This is also a tax-free benefit.
Will Va Benefits Reduce My Unemployment?
Another question many veterans have about their benefits is whether unemployment benefits are reduced or otherwise impacted by VA benefits.
The answer is that disability compensation payments from the VA do not reduce the amount of your unemployment benefits. Veterans can receive full unemployment compensation along with full disability payments from the VA.
VA Ask a queseion for the Veterans Affairs
There are some circumstances under which VA benefits do count as income. This is not an exhaustive list, and you should always check your state’s laws and regulations, but some common examples include:
Calculating income for child support and alimony. VA disability payments count as income for purposes of calculating child support and maintenance. The fact that they’re tax-free payments means they’re “invisible” to the IRS, but they’re not invisible to other agencies or for other purposes.
Calculating income for food stamps (SNAP). Under federal law, all income is counted to determine eligibility for SNAP unless it’s explicitly excluded. For SNAP purposes, “income” includes both earned income such as wages, and unearned income such as Supplemental Security Income (SSI) and veteran disability and death benefits. Because veteran disability benefits are not explicitly excluded, they are counted when determining a household’s eligibility for SNAP.
Obtaining a mortgage. VA lenders can count disability income when calculating income toward a mortgage. Borrowers with a service-connected disability are exempt from paying the VA Funding Fee, a mandatory cost the VA applies to every purchase and refinance loan to help cover losses and ensure the program’s continued success.
Financial assessment (means test). Certain non-service-connected and 0% noncompensable service-connected veterans are required to fill out a financial worksheet known as a “means test.” A means test is a gathering of financial information by which VA determines your priority group for enrollment, and whether or not you are required to make copayments for services you receive such as healthcare services.
The means test is based on prior year’s income and net worth. However, if income projections for the current year are substantially below the applicable income threshold, veterans can apply for an exemption from paying those copayments to avoid hardship.
Veterans who don’t want to complete the financial worksheet must agree to pay a copayment to the VA for services.
For purposes of the means test, payments from any source are considered income, unless they’re specifically excluded.
Top 25 Disabled Veteran Benefits (You Might Not Know About!)
Need more help figuring out how to get the benefits and compensation owed to you?
VA Claims Insider is here for disabled veterans who are exploring eligibility for increased VA disability benefits. We serve veterans in a “done with you” mastermind concept, in a community of fellow disabled veterans from around the world. Elite members work with fellow disabled veteran coaches to help you take control of your VA claim.
We fulfill our mission by offering disabled veterans a suite of digital products and services inside our membership programs. We also connect veterans with independent medical professionals in our referral network for medical examinations, disability evaluations, and credible Independent medical opinions and Medical Nexus Letters for a wide range of disability conditions.
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About the Author
Austin Green is VA disability expert, former Naval Petty Officer, and client of VA Claims Insider – “The Most Trusted Name in Education-Based Resources for Veterans.”
After spending years struggling with disabilities originating from military service he found VACI and though struggling with his own mental health at the time reached out for help. Since that time he has sought treatment, begun his claims process, and most importantly for you started coaching other U.S. military veterans with tips, strategies, and lessons learned for successfully submitting or re-submitting a winning VA disability compensation claim.
You can connect with Austin at www.VeteranCoachAustin.com