IRS Tax Tip for Veterans Day: Which VA Benefits Are Tax-Free and Which Military Income Is Taxable
The Internal Revenue Service (IRS) issued Tax Tip 2026-81 on November 10, ahead of Veterans Day, setting out the tax-free benefits available to veterans and reminding them not to include those benefits in taxable income when they file their federal returns.
According to the IRS, several Department of Veterans Affairs (VA) benefits are not taxable, including disability compensation and pension payments to veterans and their families, grants for designing a wheelchair-accessible home, grants for motor vehicles for veterans who have lost their sight or the use of their limbs, and benefits under a dependent-care assistance program. VA education benefits are also tax-free. One-time lump-sum disability severance payments received from the Department of War by veterans separated because of combat-related injuries are tax-free as well, and veterans who previously paid tax on such payments can file an amended return to claim a refund.
The IRS also noted that not all military-related income is tax-free: military retirement pay based on age or length of service is generally taxable income.
On refunds and credits, veterans may be able to claim a federal tax refund if they receive an increased VA disability rating, including retroactive determinations, or combat-related special compensation while receiving both military retirement pay and disability compensation. Eligible service members may also claim the Earned Income Tax Credit, and families with qualifying children may claim the Child Tax Credit. Further detail is in IRS Publication 525, Taxable and Nontaxable Income.
(Source: Internal Revenue Service)
Source: Internal Revenue Service
Published by GSM · USA (original Chinese edition)
Photo: 图：美国国税局总部大楼。GSM 联邦固定图库收录图片。 / Photo: Internal Revenue Service headquarters building. Image from GSM's federal asset library.
