VA Benefits and Tax Obligations

Military retirement pay based on age or length of service is considered taxable income for Federal income taxes. However, military disability retirement pay and Veterans’ benefits, including service-connected disability pension payments, may be partially or fully excluded from taxable income. Service members with service-connected disabilities may be eligible for Federal income tax exclusions of Veterans’ benefits and disability pension payments. Military retirement pay based on age or length of service is taxable and must be included as income for Federal income taxes. The amount a Retiree pays to participate in the Survivors Benefit Plan (SBP) is excluded from taxable income.

For Social Security tax purposes, military retirement pay is not considered earned income and no Social Security payroll taxes (also known as Federal Insurance Contributions Act (FICA) taxes) are withheld from military retirement pay. Military Disability Retirement Pay received as a pension, annuity or similar allowance for personal injury or sickness resulting from active service in the armed forces should not be included in taxable income if certain conditions apply. The following amounts paid to Veterans or their Families are not taxable: Education, training, and subsistence allowances; 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 lose their sight or use of their limbs; 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; and Benefits under a dependent-care assistance program.

If you want more information on your rights or need further direction contact us at info@VetDefender.com or call us at 855-312-5575.