Are VA Disability Benefits Taxable?
Michael Lostritto: Welcome to CCK Live Under 5:00. My name is Michael Lostritto, and today I’ll be answering the question, “Are VA Disability Benefits Taxable?”
VA offers a variety of benefits to veterans and service members. These benefits typically include disability compensation, assistance for dependent care, educational benefits, compensation for spouses and family members, pension, and really many more.
According to IRS publication 907, veterans’ disability benefits are not taxable. Specifically, the IRS says that veterans should not include in their income any veterans disability benefits paid under any law or regulation, or administrative practice administered by the Department of Veterans Affairs.
If a veteran is a military retiree, who receives disability benefits that do not come from VA, different rules may apply. So be aware of that. Benefits however remain tax-free regardless of the veterans rating percentage, even if they can ultimately increase their rating.
The question often comes, what if a veteran is working? How does that impact, if at all, the tax stature of their benefits? VA benefits are tax-free even if the veteran is working. So, employment does not affect the tax treatment of the veterans’ benefits.
In other words, if VA pays and administers a disability benefit, the veteran does not have to pay taxes on them. However, the veteran must pay taxes on any regular income that they earn, regardless of whether they are receiving VA disability benefits.
Veterans and their loved ones may also be eligible for a number of other tax-free benefits. These benefits typically include Dependency and Indemnity Compensation and Special Monthly Compensation. These are benefits that or either above and beyond the normal scheduler benefits that veterans may receive, or benefits that a surviving spouse may receive in the unfortunate event that a veteran may pass away.
There are a number of tax resources that veterans can access if they are having trouble filing their taxes. So, in 2015, VA partnered with the IRS to provide free tax preparation services to veterans and their families, so that’s a great resource. And also, specifically, there are several organizations that provide tax advice and filing services to veterans with low to moderate incomes. So, for veterans whose incomes fall within those limits, they should seek out one of these organizations. Some of the organizations, typically non-profitable organizations, or even law school legal clinics that will often help file income taxes for veterans within a certain income range.
So, that does it for this edition of CCK Live Under 5:00. I hope you found this information helpful. More information on veterans benefits and taxation can be found on our blog, so please check it out. As always, thanks for tuning in.
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