Special Tax Considerations for Veterans

If you are a disabled Veteran, you may be eligible to claim a federal tax refund if you have had  an increase in your percentage of disability from the Veteran’s Administration (which may include a retroactive determination) or, if you are a combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.

If this is the case, you will need to file an amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. An amended return must be filed as a paper return. Disabled veterans should include all documents from the VA and any information received from Defense Finance and Accounting Services explaining proper tax treatment for the current year.

Veterans should seek assistance from a competent tax professional before filing amended returns based on a disability determination. Refund claims based on an incorrect interpretation of the tax law could subject the veteran to interest and/or penalty charges.

VA Disability Benefits
Do not include disability benefits you receive from the U.S. Department of Veterans Affairs (VA) in your gross income.  Some of the payments considered to be disability benefits include disability compensation and pension payments for disabilities paid either to veterans or their families, grants for homes designed for wheelchair living,

grants for motor vehicles for veterans who lost their sight or the use of their limbs, or

benefits under a dependent-care assistance program.

The VA publishes an annual benefits booklet, a comprehensive guide for Federal Benefits for Veterans, Dependents and Survivors.


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