Is My VA Disability Considered Income?

Is My VA Disability Considered Income?

VA disability benefits can provide a critical source of income for those who were injured or became ill due to their military service. But, many veterans pursuing VA disability benefits are concerned about how that income will impact other areas of their financial lives. For example, are veterans disability benefits taxable income? Will they disqualify the veteran from other types of benefits? 

Here’s what you need to know. 

VA Disability Benefits are Not Taxable Income

Federal tax treatment of VA disability benefits is simple: the Internal Revenue Service (IRS) does not consider veterans disability benefits taxable income. That includes not just monthly disability payments, but other veterans benefits such asfrom GI Bill programs and training allowances administered by the VA. Also tax-exempt are VA grants aimed at making homes and/or vehicles accessible to veterans with disabilities. 

VA disability benefits also aren’t considered earned income for purposes of qualifying for the federal Earned Income Tax Credit (EIC). However, a veteran who receives disability benefits and also has earned income may qualify for EIC. 

Some Other Types of Disability Benefits May Be Taxable

Some veterans with disabilities receive benefits from sources other than the VA. You should be aware that the information in this post relates specifically to benefits administered by the VA.. If you are receiving SSDI, your disability income may or may not be taxable depending on the total amount of income you and your spouse receive. Private disability insurance payments or employer-based disability pensions may also be taxable. 

Reporting VA Disability Income

Since VA disability income is non-taxable, it generally doesn’t have to be reported. If disability benefits are your only income, you likely won’t have to file an income tax return at all. If you have other taxable income, you will still have to file as usual. And, if your spouse has income, you may want to file jointly with them, which may lower the amount of income tax due.  But, you generally won’t need to report your veterans disability income and you’ll never pay income tax on it. The best course of action is to consult with an accountant or tax preparer to ensure you are following all of the IRS’s filing rules.

VA Disability Benefits May Be Considered Income for Purposes of Other Benefits

Whether and when veterans disability benefits may be considered income for purposes of determining other benefits is a bit more complicated than taxability. For example, if a veteran with a disability is eligible for Social Security disability (SSDI), that eligibility is not affected by VA disability payments. Only earned income is considered when determining SSDI eligibility. On the other hand, Supplemental Security Income (SSI)–also administered by the SSA–is need-based. That means all income is considered and a veteran whose income exceeds the threshold will be denied, or the amount they are eligible to receive will be reduced,even if all of their income is from disability benefits. 

If you have questions about VA disability benefits or have been denied benefits, Veterans Help Group is here for you. Contact us or call (855) 855-8992 to learn more about how we can help.