How VA Disability Affects Social Security and Taxes

If you’re a veteran receiving VA disability compensation, you may be wondering how those benefits impact your Social Security payments—or whether you need to report them on your taxes. The good news? In many cases, VA disability compensation works in your favor.

Here’s what you need to know:

VA Disability and Taxes

VA disability compensation is not taxable. The IRS does not consider VA disability benefits as income, which means:

• You do not pay federal taxes on your VA compensation.
• You do not need to report it as income when filing your federal tax return.
• This applies to both monthly payments and retroactive lump sums.

Even if you receive a 100% rating or back pay from a successful appeal, it’s all tax-free.

VA Disability and Social Security

There are two main types of Social Security benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). VA disability can affect each differently.

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SSDI (Social Security Disability Insurance)

• No impact from VA disability compensation.
• SSDI eligibility is based on your work history and whether you’ve paid into Social Security.
• You can receive both SSDI and VA disability at the same time with no reduction in either benefit

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SSI (Supplemental Security Income)

• VA disability may reduce your SSI benefits.
• SSI is need-based, so any other income—including VA disability—can lower or eliminate your monthly SSI payment.4
• Even though VA disability isn’t taxed, it’s still counted as income for SSI purposes.

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A Few Key Takeaways

• You can receive VA disability and SSDI with no penalty.
• VA disability benefits are not taxed.
• SSI may be reduced by VA disability payments.
• VA benefits don’t count as earned income, which can be helpful when applying for other programs or tax credits.

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Need Help Navigating Your Benefits?

At United Veteran Benefits Agency, we’re here to support Veterans every step of the way as they pursue the VA rating they’ve earned. If you’re wondering where to start—or just want to talk it through—we’d be honored to help.  Click the button below to schedule your free consultation.