VA disability and military retirement pay are separate benefits managed by the Departments of Veterans Affairs (VA) and Defense (DoD), respectively. Despite being separate benefits, VA disability compensation and military retirement pay become closely intertwined when servicemembers are eligible for both.
In this article, we’ll cover how disability ratings determine your ability to collect VA disability compensation and military retirement pay, define the VA waiver and VA offset, and discuss the two types of concurrent receipt programs: CRDP and CRSC.
History of VA Disability and Military Retirement Pay
In 1943, U.S. Code Title 38 Section 5304 established that servicemembers could only receive one type of compensation. This code made “duplication of benefits” illegal, which, in turn, made it illegal to receive military retirement pay and VA disability compensation at the same time.
This law received pushback. Many felt that these benefits were not similar enough to be considered as “duplication” since military retirement pay is a pension based on years of service, while VA disability compensation is a monetary award based on your decreased ability to perform work after leaving the military.
Military retirement pay is also taxable at the federal level, while VA disability compensation is not. This has a big advantage: dollar for dollar, VA disability compensation gives veterans more spending power than military retirement pay.
To address dissatisfaction with the existing rule, the government introduced the VA waiver, which allows servicemembers who are eligible for both types of compensation to waive some of their DoD retirement pay for the tax-free advantages of VA disability compensation.
Veterans: Are you under 90% rated?
Winning approval for military service-connected injuries and illnesses can be a challenging process. Be confident that you’re getting the compensation that you medically, legally, and ethically qualify for.
Answer a few quick questions to get the most accurate veteran disability rating that your conditions warrant here.
VA Waiver on Military Retirement Pay
The VA waiver on military retirement pay was introduced in U.S. Code Title 38 section 5305 in 1958.
This waiver allows an exception to the law which prohibits military retirees from collecting VA disability compensation and military retirement pay at the same time. This process has also been referred to as the “VA disability offset” because retirees are offsetting some of their pay.
For example, if you are eligible for $3,000 in monthly retirement pay and $1,200 in monthly VA disability, you could waive that amount of your DoD pay to take advantage of the tax savings you would get from the disability compensation. That would mean you would receive $1,200 in tax-free disability compensation and $1,800 in taxable military retirement pay.
However, this waiver still requires a loss in compensation. So, in 2003, the DoD introduced an additional exception to Title 38 called “concurrent receipt,” which allows some military retirees to receive their full military retirement pay and VA disability compensation amounts.
Whether or not you are eligible for concurrent receipt is determined by your individual or combined VA disability rating and the cause of your disability.
Can you receive 100% VA disability and military retirement pay?
Yes, if your disability rating is 100%, you can receive VA disability compensation and your full amount of military retirement pay. But you don’t have to have a rating of 100% to qualify for concurrent receipt.
Concurrent receipt was rolled out via the Combat-Related Special Compensation (CRSC) and the Concurrent-Receipt Disability Pay (CRDP) programs in the early 2000s. Present-day retirees who are eligible for either program can receive their full military retirement pay and VA disability compensation without any offset.
VA Concurrent Receipt Eligibility
If you are a military retiree with a service-connected or combat-related VA disability rating of 50% or higher, you are eligible for CRDP. If you are a military retiree with a combat-related VA disability rating of 10% or higher, you are eligible for CRSC.
Let’s review how the government determines eligibility for concurrent receipt:
| Concurrent Receipt Eligibility | |||
| Individual or Combined Disability Rating | Time in Service | Disability Terms | Program Eligibility* |
10% or higher | 20 years or more | Combat-related | CRSC |
| Less than 20 years (chapter 61 medical military retirement) | Combat-related | CRSC | |
50% or higher | 20 years or more | Service-connected | CRDP |
| 20 years or more | Combat-related | CRDP & CRSC | |
*Full eligibility rules can be found here for CRSC and here for CRDP.
It is possible to be eligible for both CRSC and CRDP, but you are only allowed to receive additional compensation from one of them at a time. If you are eligible for both, you have the ability to choose between the two programs. Let’s take a look at how they compare.
CRDP vs. CRSC
While the goals of CRDP and CRSC are similar, the programs have different rules.
Retirees who are eligible for both can only receive payment from one of the programs at a time, so it’s especially important to see how they compare.
| CRDP | CRSC | |
| Eligibility | Military retirees who have a VA disability rating of 50% or more from a combat-related or service-connected injury (injury does not have to be sustained in combat) | Military retirees who have a VA disability rating of 10% or more with a combat-related injury. |
| Pay Type | Disability Pay | Special Compensation |
| Payment Method | Deposited into the account where you receive VA disability compensation | Deposited in the same account that you receive retired pay |
| State Tax Requirements* | Depends on the state | Depends on the state |
| Subject to federal income tax? | Yes | No |
| Subject to divorce pay? | Yes | No |
| Subject to child support garnishment? | Yes | Yes |
| How to Apply | Automatic enrollment upon receiving your disability rating | Apply through your branch of service |
| Affect to Military Retirement | Receive your full military retirement pay and VA disability pay without a reduction in either | Receive your full military retirement pay and VA disability pay without a reduction in either |
*Depending on the state’s law, military retirement pay may also be subject to state income taxes.
If you are eligible for both CRSC and CRDP, the Defense Finance and Accounting Service (DFAS) will automatically apply the pay that is most beneficial to you based on the gross amounts. After becoming eligible for both, you will receive a CRDP/CRSC Election form that you can use to switch programs.
If you don’t want to change the program that DFAS enrolls you in, you don’t have to fill out the form at all, but if you do want to switch, you must complete and return the form within 45 days to switch.
You can make changes outside of the initial enrollment during the CRDP/CRSC open season, which usually occurs annually from January 1 through January 31st.
Do Disabled Veterans Qualify for VA Home Loans?
Disabled veterans who have VA loan entitlement are eligible for a VA home loan. However, all active-duty military and veteran borrowers have multiple requirements to hit in order to fully qualify for a VA home loan, including meeting the service standards and a lender’s specific credit score minimum to residual income and acceptable debt-to-income ratio.
Check if you meet the official VA loan requirements here.
CRDP/CRSC Retroactive Pay
The rule of concurrent receipt was initially phased in over a 10-year period from 2004 to 2014. This allowed military retirees to earn CRDP and CRSC back pay, which helped restore military retirement pay to retirees who had waived their pay before the exception was created.
All servicemembers who retire after 2014 automatically receive military retirement pay and VA disability compensation as long as they meet the eligibility requirements for CRSC or CRDP.
For more information on how to claim retroactive pay, see our CRSC guide and CRDP guide.
VA Disability Offset to Military Retirement Pay
Although the concurrent receipt programs have enabled many retirees to receive their rightful benefits, a significant number of servicemembers still do not qualify.
Currently, military retirees with a VA service-connected disability rating of 40% or lower are not eligible for concurrent receipt. Remember, if your disability is combat-related, you are eligible for CSRC at any rating above 10%.
If you have a service-connected disability rating of 40% or lower, you are still subject to the rules of the VA waiver, and your DoD retired pay will be offset by your VA Disability Compensation amount.
Let’s review an example to see how this could affect your pay.
Let’s say our retiree earns a monthly retirement check of $2,000. Let’s also assume he has a VA service-connected disability rating of 40% and one dependent (a spouse). His VA disability compensation would be $838.28 per month according to 2024 rates.
This retiree would receive $838.28 from the VA, which would adjust his monthly retirement pay from $2000 to $1,161.72 ($2,000 – $838.28 = $1,161.72).
So, the total amount still equals $2,000 per month, but $838.28 of that is tax-free income.
You can also see how this uniform method for computing the VA disability offset is easier than awarding retirees a percentage of their pay as tax-free and provides more funds to veterans in the end.
Concurrent Receipt vs. VA Offset
The main benefit of the VA disability offset is receiving tax-free pay from the VA. The final dollar amount is the same, but the tax-free portion gives veterans greater spending power.
However, the amount would be much greater if veterans received both forms of compensation under concurrent retirement disability pay laws. The increase would mean the full value of the military retirement pay plus the full value of the VA disability compensation.
For a military retiree, going from a 40% disability rating to a 50% rating is huge.
If we use the same scenario as above, an increase from 40% to 50% would mean that the retiree’s VA disability compensation would increase by $340.88 per month, and the increased pay would not reduce his military retirement pay. The net effect is this:
- 40% disability rating: $2,000 total ($1,161.72 taxable; $838.28 non-taxable)
- 50% disability rating: $3,179.16 total ($2,000 taxable; $1,179.16 non-taxable)
The difference is an increase of $14,149.92 per year, none of which is taxable income.
Will concurrent receipt laws be extended to everyone?
In a perfect world, all military retirees with VA service-connected disability ratings would be eligible to receive their full amounts of disability and retirement pay. Unfortunately, the government budget isn’t limitless, and the current payment methods are being used to help control budgets.
In January 2023, a bill was introduced to the US House that would allow military retirees with a 50% service-connected disability to receive concurrent receipt. So far, this bill has not been passed.
About Post Author
Comments:
About the comments on this site:
These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.
Jeffrey Whitehead says
I am a military retiree who has been rated 10% disability by the VA in July 2023 and 40% disability in January 2024. The 30% increase in the rating is retroactive to 2022. The VA documented how much they withheld from my monthly entitlement in 2022 and 2023 (all of my monthly compensation in 2022 and most of it in 2023). Before I finalize my 2023 Federal income tax return, is there a way that I can claim the amount the VA withheld as tax exempt and reduce my taxable pension by that amount? Can I get the VA to document it or can I get a revised 1099 from DFAS?
Ryan Guina says
Jeffrey, I wouldn’t report an income level different from your 1099-R. The IRS receives your 1099-R from DFAS and expects you to pay taxes on that amount. They won’t know about the VA compensation. You will need to contact DFAS to get a corrected 1099-R for 2023. You may wish to do that for the 2022 tax year, too. You can amend your 2022 tax return, which may result in a small refund.
It may take some time for DFAS to issue the corrected 1099-R, so you may wish to file your 2023 taxes with your current information, then file an amended return after you receive the corrected 1099-R.
Another option is to file an extension for your 2023 tax return. This won’t be an issue if you expect a refund. However, you should make an estimated tax payment before the tax deadline if you expect to owe money.
Best wishes!
Roy Peterson says
I am a Federal civil service employee under FERS considering buying back my military time. I receive a monthly military retirement check that is offset by my VA disability check, I am rated at 40% disabled. Once I retire under FERS and (waive) no longer receive my military retirement pay, will I still receive my VA disability pay or do I lose it too?
Ryan Guina says
Roy, your VA disability compensation isn’t impacted by your retirement from the military or the FERS system. It is an independent benefit. I strongly recommend running the numbers with your military retirement and FERS retirement to see if buying back your military service credits will be a net positive or net negative. Also investigate if or how it will impact your retiree healthcare benefits. It’s rare that you would come out ahead by buying back military service credits and giving up active duty retirement benefits in lieu of FERS retirement. I recommend asking your FERS Human Resources office to provide two official retirement benefits estimates—one with and one without buying back your military service credits. You can them compare them and see which makes the most financial sense. Best wishes!