Are VA Disability Benefits Taxable? Tax Information About Your Benefits

How VA Disability Benefits Work

If you have a service-connected disability, you deserve to receive compensation from the VA. The VA awards monthly disability payments to Veterans who they recognize as having disabilities that have been caused or worsened by their military service. 

These service-connected disabilities can be either physical or psychological, and the VA grants a wide range of monthly compensation for conditions of varying severity. If you have a service-connected disability that makes it impossible for you to work, you may even be able to qualify for the highest possible disability benefits from the VA

What Qualifies A Veteran For Benefits? 

While many Veterans may deal with health problems, it takes more than just a physical or psychological issue to qualify for VA disability benefits — your disability needs to be service-connected. A service-connected condition is directly linked to a Veteran’s time in the military. This means that the disability was either caused or worsened by an injury or experience from a Veteran’s time in service. When a Veteran applies to receive disability benefits, the VA requires them to go through the process of getting their condition evaluated – examinations, reviewing medical records, and more can all contribute to whether the VA approves or denies a Veteran’s claim.

Veterans can get service-connected for a wide range of conditions. In most cases, all the VA needs to establish a service connection is a current medical diagnosis, an in service event or injury, and a verifiable link between a Veteran’s disability and their in service event or injury. The VA refers to this link as a nexus. Without a verifiable nexus, a Veteran’s claim is typically either deferred or denied by the VA. 

If the VA denies a Veteran’s claim, it typically means that they have not presented the VA with the evidence needed to get an approval. A Veteran may also find their claim denied if they do not meet the VA’s requirements after filing a claim. If a Veteran does not take the required Compensation & Pension Exam, present military medical records and personnel records, or otherwise neglect to fulfill the VA’s requirements, their claim will most likely either be deferred or denied.

Are VA Disability Benefits Taxable? 

For many Veterans, disability benefits from the VA are the primary and sometimes only reliable income source. For Veterans who are unemployed due to their disabilities, monthly benefits from the VA are often the only means they have to support themselves and their families. Because of the necessity of benefits for so many Veterans, any tax deductions from monthly payments would be a major drawback.

Thankfully, VA disability benefits are not taxable – this means the amount that you receive from the VA each month will not be reduced before it gets to you. However, the same is not true for military retirement benefits. Any pension that you have received for your service in the military can be taxed, but these benefits can still help you maintain financial stability if you are unable to work. 

Which Military Benefits Are Tax-Free? 

The VA’s disability benefits are not the only form of tax-free compensation that Veterans can receive. In addition to disability payments, some disabled Veterans can also qualify for non-taxable grants for certain conditions. For example, the VA often gives tax-free grants to Veterans who use wheelchairs to afford renovations to their homes to accommodate their disabilities. Some disabled Veterans may also receive grants to make service dogs more affordable, especially Veterans suffering from psychological conditions like PTSD.

Some Veterans may also qualify for other grants that can allow them to have easier access to vehicles, housing, and other necessary resources. If you have an especially severe service-connected disability, you may even be able to qualify for combat-related special compensation (CRSC). This form of compensation is similar to the VA’s standard disability benefits and is also tax-free.

How The VA Rates Service-Connected Disabilities 

In the eyes of the VA, service-connected disabilities are measurable in their severity. Based on how the VA assesses the severity of a Veteran’s disability, they will grant a specific disability rating between 10 and 100 percent. VA disability ratings directly correspond to specific levels of monthly compensation, and the rating system increases in percentages of 10.

If a Veteran receives a disability rating that is lower than 10 percent, this means that the VA has ruled that their disability is not severe enough to warrant monthly disability benefits. If a Veteran receives a 10 percent disability rating, it means the VA sees their condition as warranting disability benefits, but only the lowest level of monthly compensation. A 10 percent disability rating typically means that a Veteran’s disability affects their quality of life, but not enough to stop them from working and functioning normally in everyday life. 

A higher disability rating can indicate several things:

• A higher disability rating sometimes means that a Veteran suffers from one severely disabling service-connected condition. This condition is seen by the VA as severe enough to warrant a high disability rating on its own, even without the presence of additional disabilities or secondary conditions.
• A higher rating can also be cumulative. VA disability ratings are often a combination of the score given to multiple conditions that a Veteran suffers from. If a Veteran has multiple service-connected disabilities, they may be eligible to receive a higher disability rating, even if their disabilities are not extremely severe.
• A high disability rating may also indicate that a Veteran suffers from secondary conditions. These are mental or physical problems that are caused or worsened by a service-connected disability. While secondary conditions are not directly linked to a Veteran’s military service, they can still have an influence on a Veteran’s disability rating.

If a Veteran receives the highest possible disability rating, 100%, it often means:

• A Veteran is so severely disabled that they qualify for Total Disability Based On Individual Unemployability (TDIU). TDIU indicates that a Veteran’s condition is so debilitating that they are ineligible to work and cannot support themselves without disability benefits.
• A 100% disability rating can also mean that a Veteran’s condition has a significant negative impact on their ability to function mentally and emotionally. The VA recognizes service-connected psychological problems as grounds for receiving disability benefits. These conditions can often be severely disabling, sometimes so much so that a Veteran cannot maintain relationships or cope in healthy ways.
• A 100% rating may also indicate that a Veteran suffers from a combination of chronic symptoms that have a presumed service connection. In some cases, the VA assumes that Veterans who served in specific locations during certain time periods have been exposed to factors that can lead to disabilities.In some cases, the VA will not need additional verification that a Veteran’s condition is service-connected if they served within a certain time frame in a specific campaign. One of the most common examples of this exception to the normal VA disability rating methods is Gulf War Syndrome.

A Denied Claim Doesn’t Mean Benefits Are Unattainable 

A denied disability claim does not necessarily mean that a Veteran has no chance of receiving disability benefits. If your claim has been denied, you can recruit an attorney and appeal the VA’s decision. Veterans reserve the right to appeal any VA decision, and an appeal involves the VA reviewing their decision regarding your claim. In many cases, a decision review can lead the VA to approve a claim that they had previously denied. 

If the VA has denied your claim, the best step to take to move towards receiving benefits is making an appeal. During the appeals process, you may have a second chance to present the VA with additional medical evidence and documentation to support your claim. If the VA is satisfied with the evidence you present, your claim may get approved. This means you will be able to start receiving the benefits that you deserve.

You Can Appeal A VA Approval, Too 

Even if the VA approves your disability claim, you still may not be getting the benefits you deserve. The VA gives benefits based on a rating scale, and each rating corresponds to a higher level of monthly compensation. If you have been given a disability rating that you feel is lower than what you deserve, you can appeal the VA’s decision and potentially get a higher rating.

Getting the disability rating that your condition warrants can be life-changing. If you have a severe service-connected disability that has left you unable to work, you may be able to qualify for the highest possible disability rating — 100%. If you have been granted a lower than a 100% rating after filing your claim, an appeal with the help of a skilled attorney can make a major difference in your ability to stay financially stable.

If you need assistance appealing your VA claim, contact the attorneys at Berry Law for a free case evaluation.

Sources: 

https://www.mayoclinic.org/diseases-conditions/post-traumatic-stress-disorder/symptoms-causes/syc-20355967

https://blogs.va.gov/VAntage/16726/free-tax-return-preparation-for-veterans-military-members-and-their-families/

https://www.ada.gov/regs2010/service_animal_qa.html