Is VA disability compensation taxable?

Q: Is VA disability compensation taxable?

No. VA disability compensation is not taxable income at the federal level and is excluded from gross income under 38 U.S.C. § 5301 and IRS rules. It does not need to be reported on a federal tax return, and states do not tax it either. Military retired pay, by contrast, is generally taxable unless waived or offset.

Last verified August 1, 2026 · Reviewed by Esteban Magallon, VA-Accredited Claims Agent

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Disability compensation, DIC, and grants for adapted housing or vehicles are all excluded from taxable income.
IRS Publication 525 lists veterans' benefits paid under any law administered by VA as nontaxable.
Because it is nontaxable, VA compensation is not counted as earned income for the Earned Income Tax Credit.
Combat-Related Special Compensation (CRSC) is also nontaxable; Concurrent Retirement and Disability Pay (CRDP) is taxable retired pay.

This is general educational information about VA claims — not legal or medical advice. Individual outcomes depend on the record. Oakridge Claims is a private VA-Accredited Claims Agent practice and is not affiliated with the U.S. Department of Veterans Affairs.

Is VA disability compensation taxable?

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