Veterans often need to understand the details of Veterans Affairs (VA) benefits when navigating the financial landscape. These benefits provide crucial support by offering financial assistance in healthcare, education, housing, and disability compensation. Whether you are a former service member from the Army, Navy, Air Force, Marine Corps, Coast Guard, National Guard, or Reserve, VA benefits are there to help you transition back into civilian life.
One common question is whether these benefits are subject to taxation, just like other forms of income. Understanding how VA benefits interact with the tax system is essential for veterans and their families to effectively manage their finances.
Are VA Benefits Taxable in 2026?
For federal income tax purposes, most VA benefits are completely tax-free in 2026. The IRS excludes these payments from gross income, meaning they are not reported on your tax return and do not increase your tax bill.
This rule applies regardless of your disability rating, age, or employment status. Even with the 2.8% Cost-of-Living Adjustment (COLA) taking effect in January 2026, the tax-exempt status of your benefits remains protected under federal law.
Which VA Benefits Are Not Taxable?
The following VA benefits are fully exempt from federal income tax:
- VA Disability Compensation: Monthly payments for service-connected conditions.
- Dependency and Indemnity Compensation (DIC): Survivor benefits paid to eligible spouses, children, or parents.
- Special Monthly Compensation (SMC): Additional compensation for severe disabilities or Aid & Attendance needs.
- VA Pension Benefits: Income-based support for wartime veterans with limited financial resources.
- GI Bill & VA Education Benefits: Tuition assistance, housing allowances, and book stipends are not taxable.
These benefits are excluded from gross income under federal law, so the VA does not issue a W-2 or 1099 for them.
2026 VA Disability Pay Rates (2.8% COLA Increase)
The 2.8% COLA increase raises your monthly check but does not change its tax-free status. Here are the rates for a veteran with no dependents:
| Disability Rating | 2025 Monthly Rate | 2026 Monthly Rate |
| 10% | $175.51 | $180.42 |
| 30% | $537.42 | $552.47 |
| 50% | $1,102.04 | $1,132.90 |
| 70% | $1,759.19 | $1,808.45 |
| 100% | $3,831.30 | $3,938.58 |
Is Military Retirement Pay Taxable?
Yes. Unlike disability compensation, military retirement pay is generally treated as taxable income. However, there are nuances based on how you receive your pay:
- CRSC (Combat-Related Special Compensation): 100% Tax-Free.
- CRDP (Concurrent Retirement and Disability Pay): Taxable (it is treated as regular retirement pay).
- Disability Offset: If you waive a portion of your retirement pay to receive VA disability, that “waived” amount becomes tax-free.
Important 2026 Tax Forms
- 1099-R: You will receive this from Defense Finance and Accounting Service (DFAS) for your retirement pay.
- No Form: You will not receive a tax form for VA disability.
State Taxes and Property Tax Exemptions
While federal rules are consistent, state rules vary. In 2026, most states:
- Do not tax VA disability compensation.
- Offer Property Tax Exemptions for disabled veterans.
- Example: Many states provide 100% property tax relief for veterans with a 100% P&T rating.
Do I have to pay taxes on SSDI?
You may have to pay taxes on Social Security Disability Insurance (SSDI) if your total income, including SSDI and other sources, exceeds a certain threshold. In 2024, if you file individually and your income is over $25,000, or over $32,000 for joint filers.
Are VA disability benefits taxable?
No, VA disability benefits are not taxable. These payments are considered tax-exempt and are not included in your gross income, so you don't need to report them on your tax return.
Can I get a tax refund if my only income is Social Security disability?
Yes, you may still qualify for a tax refund if your only income is Social Security disability. If your income is low enough and you qualify for certain tax credits, like the Earned Income Tax Credit (EITC), you may receive a refund, even if you didn't owe taxes.