Disability compensation and pension payments for disabilities paid either to veterans or their families by the Department of Veterans Affairs are not taxable. In addition, disabled veterans may be eligible to claim a federal tax refund based on:
- an increase in the veteran's percentage of disability from the Department of Veterans Affairs (which may include a retroactive determination) or
- the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.
To do so, the disabled veteran must file an amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed tax return. See Publication 525, Taxable and Nontaxable Income, for more information. If needed, veterans should seek assistance from a competent tax professional before filing an amended return based on a disability determination.
For more information see Special Tax Considerations for Veterans and Information for Veterans with Disabilities. If you need assistance with appealing a VA disability claim, contact Rick Rousseau at 254-699-9999. He is accredited by the Department of Veterans Affairs to provide representation services to claimants before the VA.