Do I Need to Report Nontaxable Veteran's Disability Benefits?
Veteran’s disability benefits from the U.S. Department of Veterans Affairs are generally not included in taxable income. The portion of a Veteran’s disability payment which qualifies as a service-connected disability should not be included in your taxable income. If you receive a disability pension based on years of service, you should include that amount or portion of a pension in your taxable income.
Conditions for excluding disability pensions from taxable income
Service-connected disability pension payments you can exclude from taxable income result from active service in the:
- Armed forces of any country
- National Oceanic and Atmospheric Administration
- Public Health Service
- Foreign Service
Your Veteran’s disability payments should be excluded from taxable income if any of the following conditions apply:
- You were entitled to receive a disability payment before Sept. 24, 1975
- You were a member of or committed to become a member of a listed government service before Sept. 24, 1975
- You receive the disability payments for a combat-related injury under certain situations
- You would be entitled to receive full or partial disability compensation from the Department of Veteran Affairs if you filed an application
Refer to IRS Publication 907 for qualifying details.