Military Retirement pay is taxable income like all other similar retirement income.  Military retirement pay is paid through the Department of Defense, Defense Finance and Accounting Services (DFAS).  The pay stub will have DFAS in the address of the payor.  This type of payment is also frequently called an “annuity.”  This is a payment for the rest of the veteran’s life and is taxable.

     Payments made through the Veteran’s Administration are generally not taxable.  The two primary payment types are (1) Compensation and (2) Pension.  Compensation is payment to a service member for an injury or disease that occurred during service or was due to being in the service.  This type of benefit is the military’s version of worker’s compensation.  The payment is based on the veteran’s disability rating.  Disability compensation is not taxable income.

     Pension is payment to a prior service member who served in the military during a war time period, is 65 or older or is disabled, and has limited income and resources.  This is the VA’s version of Supplemental Security Income (SSI).  When a prior war time veteran has a disability and meets the criteria listed above in this paragraph, then the VA will pay an amount of money to the veteran to bring the Veteran’s income up to a certain level.  This income is not taxable income.

     When a veteran needs the aid and attendance of another person to assist with walking, bathing, dressing, going to the rest room, medication monitoring, etc., then the veteran may also be able to obtain pension with aid and attendance.  This additional income, aid and attendance, is not taxable income.