Is VA disability compensation taxable?
Veterans with a compensable service-connected rating may be eligible to exclude VA disability compensation from federal gross income, verify with the IRS.
The short answer, and the rule
VA disability compensation is excluded from federal gross income under 26 U.S.C. §104(a)(4). VA issues no 1099 for it, and the amount is not reported on a federal income-tax return. The exclusion attaches to the compensation payment itself, so it applies at every rating level that produces a payment.
The tool renders this at a 10% threshold for a practical reason: a 0% rating is generally noncompensable, so there is no payment to exclude. Once a rating is compensable, the compensation arrives free of federal income tax without anything to file for it.
What the exclusion does not change
The exclusion is a federal income-tax rule. It does not remove the compensation from every calculation elsewhere: some means-tested programs, such as SNAP, still count VA disability compensation as income when they decide eligibility. State tax treatment and program-specific income rules are separate questions.
The Internal Revenue Service decides federal tax questions. This page explains the rule; it does not determine anything about your return. Verify your own situation with the IRS or a tax professional.
See it next to everything else your rating may open
The Benefits Explorer lists this program beside the rest of the federal set, and your state’s verified programs, keyed to your combined rating. Educational only. Every program is decided by the agency named on it.