Are Veteran Disability Benefits Regarded As Taxable Income?

Any person that is injured while they served in any of the armed-forces is typically eligible to receive what is known as veteran disability benefits or compensation. This is a monthly benefit payment that offers a number of veterans with a sole income source or a supplemental income source. These are benefits that are exempt from the taxable income of the disabled veteran.

Special Tax Considerations

Unlike the typical wages that are earned from a job where a person works. The veteran disability benefits do not fall under taxable income. This will mean that the money that is paid to the veteran will not increase the tax burden of the veteran. And is not used in order to calculate the tax amount that the veteran will owe to state or federal governments. It does not matter how much the veteran is receiving when it comes to disability benefits. The State Tax Authorities and the Internal Revenue Service do not take these benefits into consideration when working out the income of the veteran.

Payments To Children Or Spouses

On occasion, the veteran might be severely disabled that his or her spouse may be granted compensation directly from the VA in order to care for the veteran. If the veteran passes away while the application made for a disability benefit is still in the process or pending, the children and/or spouse might receive the back payments on behalf of the veteran for their disability benefits as soon as the application is approved. Regardless of the reason as to why children or a spouse are paid these disability benefits (from the death of the veteran or having to care for the veteran), these benefits will not be taxable when it comes to the children or the spouse.

Lump-Sum Benefits

It can take veterans months and in some cases, years to apply successfully for a disability benefit. Once the benefits undergo the approval stage, the VA which stands for the Department of Veterans Affairs, issues one lump-sum payment, which covers the back payments for the benefit that the veteran is now owed. Even when the lump-sum payment amount exceeds thousands upon thousands of US dollars, this large payment will also not be included in the taxable income of the veteran.

Changes Made To Disability Benefits

If the disability benefits of the veteran change, the tax returns that were filed for previous years might also require adjustments. For instance, if the disability rating of the veteran increases retroactively from 2010, then the veteran should be checking to establish whether this change in the disability benefits is going to lower his or her taxable income in association to the taxes that were filed from the year 2010 to the year 2014. In these cases, the taxes that the veteran had to pay for other forms of income in most cases will also be reduced, and this is when the veteran may become eligible for a refund (tax).

veteran disability benefits

How To Proceed With A VA Disability Claim

For those who have suffered from military-related injuries, they are usually eligible for VA disability benefits. These benefits are all non-taxable and will be awarded according to the disability rating that the applicant receives. If the VA has approved the claim, the rating assigned ranges from 0% to 100%. Even the 0% rating is an acknowledgment that the person suffered either an injury or illness while they were on duty or actively training in the armed forces or the military, and this illness or injury is linked to their military service. It is better to receive a 0% rating in comparison to receiving no-service related ratings. This is important because if the health or condition of the applicant had to worsen as time goes by, they are permitted to request that their rating is upgraded accordingly.

For veterans with PTSD (post-traumatic stress disorder), this disability rating falls under the General Rating Formula for Mental Disorders, the criteria for these disability ratings associated with these impairments include 0%, 10%, 30%, 50%, 70%, and 100%. The Veteran PTSD benefits form a part of VA disability benefits made available to the military personnel who suffered such injuries while they are on duty. The impairment ratings are used to determine how the veteran’s symptoms of their service-related condition will translate into the overall monetary and percentage value.

Who Is Eligible For VA Disability Compensation?

Veterans are able to apply for VA disability compensation or benefits when they are suffering from a current injury or illness called a “condition” that has affected their mind, body, or in some cases, both. These applicants need to match at least one of these requirements set out below:

Both These Facts Need To Be True:

• Served on inactive-duty training, or active-duty training, served on active-duty, AND

• Have secured a disability rating according to their service-connected condition

One Or More Of These Need To Be True. The Applicant:

• Got injured or sick while they were serving within the military, and they are able to link the condition to an injury or illness which is known as an “in-service” disability claim, OR

• Had an injury or illness before joining up with the military, and the act of service or training with the military has caused it to become worse, referred to as a “pre-service” disability claim. OR

• The applicant has a disability that is associated with their active-duty service that only appeared after their service came to an end, known as a “post-service” disability claim.

What Are Presumed Disabilities?

These are chronic or long-lasting illnesses that appear in the first year after the veteran is discharged from duty. It can also include diseases that are caused by coming into contact with a contaminant such as toxic chemicals or hazardous materials while on duty. Or illnesses or injuries that have come about or occurred due to spending time as a POW (prisoner of war), usually in a foreign country.

When an applicant files for veteran disability benefits, the VA will review all the available evidence along with supporting documents in order to decide whether the veteran is eligible for these benefits.