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Do I Have to Pay Taxes on Veterans Disability Benefits?

Published on June 11th, 2019

Understanding the tax implications of your veterans benefits is an important aspect of ensuring your financial stability. Fortunately, you do not need to report your veterans disability payments to either the federal Internal Revenue Service or to the tax authorities of your state. In fact, you do not need to pay taxes on most of the benefits you and your family can receive from the Department of Veterans Affairs. However, unlike veterans disability benefits, your military retirement pay is subject to taxation.

Some veterans who apply for their tax-free disability benefits are rejected, either because of their less than honorable discharge status or because the VA does not believe the disability was caused or made worse by the military service. In these situations, the veterans benefits lawyers of Jackson & MacNichol can help by gathering the evidence needed to support your claim on appeal. Call us today at 800-524-3339 for a free consultation.

What Veterans Benefits Are Exempt from Taxation?

In addition to your veterans disability compensation, there are several other types of VA benefits that are not subject to taxation at the federal and state levels. This means that when you file your taxes, you do not need to include these sources of income into the calculation of your gross income, which can save you significant amounts on your annual income taxes. Among the veterans benefits that are not considered taxable income are:

  • Disability compensation
  • Disability pension
  • Grants to make your home wheelchair accessible
  • Grants for a vehicle if you have lost your sight or a limb
  • Training, education, and subsistence allowances
  • Proceeds from veterans insurance or endowment
  • Interest on insurance dividends deposited with the VA
  • Benefits from dependent care assistance
  • Payments for compensated work therapy

The VA pays some benefits directly to the survivors or dependents of a veteran. Some of these benefits are tax-free as well, including:

  • Disability pensions or compensation
  • Survivor’s pension
  • Veterans insurance proceeds
  • Death gratuity paid to a surviving dependent of a veteran who served after September 10, 2001

Other kinds of military benefits must be reported on your income taxes.  The most common taxable benefit for veterans is military retirement pay. Some of the retirement pay is deducted for the Survivor’s Benefit Plan, and this portion is not taxable. When you file your taxes, make sure that you report the net amount of your retirement pay, which will reflect this deduction. Further, military retirement pay is also not subject to social security withholding taxes.

Veterans Benefits Lawyers Can Help You Maximize your Compensation

The path to getting the benefits you and your family deserve is not always easy. Sometimes, you may have trouble finding the documentation and expertise necessary to convince the VA that you deserve disability benefits. If the VA decides to deny your compensation or pension benefits in whole or in part, a lawyer can help you get justice. At Jackson & MacNichol, we have a proven track record of helping our country’s veterans to get access to the compensation they are entitled to. Call us today at 800-524-3339 to learn how our veterans lawyers can assist with your case nationwide.


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