According to the Department of Veterans Affairs, more than five million U.S. veterans receive disability compensation. The VA spends about $125 billion annually to provide financial assistance to those seriously injured while serving their country. When they first start collecting it, some veterans wonder, “Is VA disability considered income?”
If you just received one of your first VA disability checks, you might be asking this question now. Take the time to figure out when VA disability is considered income so that you’re prepared accordingly to resolve any tax issues.
Keep reading to find out when the VA disability checks you receive are factored into the equation.
If you’re one of the many veterans wondering, “Is VA disability considered income?” you’ll be happy to hear that it is not taxable. The Internal Revenue Service and other tax agencies consider VA disability payments tax-exempt compensation.
For this reason, you will not have to include VA disability income in your reported gross revenue each year when filing your taxes. They also don’t count toward the Earned Income Tax Credit (EITC), though some veterans may qualify for the EITC if they were permanently disabled while serving in the U.S. Armed Forces.
The IRS might not need to know about any VA disability compensation you collect yearly, but that doesn’t mean it won’t be considered in other instances.
If, for example, you’re legally required to pay alimony or child support following a separation or divorce, VA disability payments may come into play. They’ll be used for alimony or child support calculations.
VA disability payments are also a factor when the Social Security Administration determines a person’s eligibility for Supplemental Security Income (SSI). They are used to calculate how much they will receive in SSI payments.
Additionally, VA disability compensation is considered when you apply for Supplemental Nutrition Assistance Program (SNAP) food benefits. You may not be eligible for them if your VA disability payments exceed a certain amount.
Once upon a time, VA disability income also had to be included in the Free Application for Federal Student Aid (FAFSA) that parents and students fill out to seek financial aid for college. However, it’s no longer taken into account when determining financial aid eligibility.
VA disability is typically considered income when veterans apply for rental properties or fill out mortgage applications to buy properties. In this case, VA disability compensation will show landlords and lenders that veterans can afford to rent or buy properties. This income could help them land a rental property or qualify for a VA loan to invest in a house.
Veterans who take advantage of the HUD-VASH program that provides them with rental assistance will also have their VA disability considered. To qualify for this program, they must be prepared to pay a minimum of 30% of their adjusted family income in rent. This income will include their VA disability compensation.
Answering the question, “Is VA disability considered income?” is easy when discussing your tax obligations. However, it isn’t always as simple to answer regarding other financial aspects of your life.
If you’re confused about the potential impact VA disability compensation will have on your finances, don’t be afraid to reach out to a tax consultant from Levy & Associates for assistance. Contact us at 313-447-1704 today or fill out this brief form to schedule a meeting with one.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.