Is my military retirement pension taxable if I am a 100% disable veteran?

Forum|Forum|6 years ago
June 5, 2019
5 replies
0 views

100% disable receiving disability from VA (non-taxable) and Army retired pension. Is my military retirement pension taxable if I am a 100% disable veteran?

TurboTax Premier Windows

Best answer by BarbL

Yes, the retirement portion is taxable, and is reported to you on your 1099-R. The disability from the VA is not taxable and not reportable, as you know.

Some states offer exclusions for military retirement pension, or for disabled taxpayers. Which state return do you file?

frankie-mirandaAuthor

I am in Alabama and does not tax my military pension.

John Schulte

Everyone,

This is my first year receiving a pension and just about died at the tax bill. In any case Minnesota also does not tax military pensions either.

DMarkM1

You are correct. Here is a link with information on the military retirement tax friendly states.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

BarbLAnswer

Employee

Yes, the retirement portion is taxable, and is reported to you on your 1099-R. The disability from the VA is not taxable and not reportable, as you know.

Some states offer exclusions for military retirement pension, or for disabled taxpayers. Which state return do you file?

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

frankie-mirandaAuthor

I am in Alabama and does not tax my military pension.

CarolynCC137

I am 100 percent disabled and draw a pension from the Air Force since 1995. Now I didn’t realize that my pension was taxable and have never filed taxes. So in this case what should I do?.

I appreciate your help.

Thank you,

Carolyn Barry

CarolynCC137

I am 100 percent disabled and draw a pension from the Air Force since 1995. Now I didn’t realize that my pension was taxable and have never filed taxes. So in this case what should I do?. I live in Delaware.

I appreciate your help.

Thank you,

Carolyn Barry

ThomasM125

@CarolynCC137 Your pension distribution may be taxable if reported to you on a form 1099-R. You can enter that form in TurboTax to see if it affects your tax. You enter it in the Income and Expenses section of your federal tax return. Look for Retirement Plans and Social Security, then IRA, 401(k), Pension Plans (1099-R). Just complete that section by entering your form 1099-R information and answering the questions to see if your refund or tax due changes.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Purplebenisimo

Please note (link below) that page 18 of IRS Tax pub 525 is being *incorrectly* interpreted by some VA rated Disabled Vets to exempt fed taxes on one’s military pension (a pension based on number of years of service). You have to read the pg18 wording carefully and note that it’s disability compensation that is excluded from fed taxes and that only in cases of disability retirement/disability pensions (not pensions based on number of years served ) do the provisions on page 18 apply. https://www.currentfederaltaxdevelopments.com/blog/2022/4/29/disabled-veteran-could-not-exclude-military-retirement-pay-in-excess-of-amounts-received-from-va-as-disability-

payments?format=amp

Also, just because one can convince DFAS to reduce their W-4 Fed tax withholdings based on one’s interpretation of Page 18 of IRS pub 525, it doesn’t mean that Military Pension Fed taxes aren’t still due to the IRS at the end of the tax year. The IRS (not DFAS) is the governing authority on taxable/non taxable income and their determinations on page 18 exceptions are stated on the link above. One’s tax withholdings, if under represented at the end of the tax year , can incur penalties. I hope this helps.

iamavol

I am in the same boat looking into this topic. Initially I agreed with the premise that Military Retirement based off years of service is taxable and VA disability compensation is not. However, a friend of mine who also is retired, told me that his retirement is NOT being taxed as is his VA not being taxed. He sent me the packet he sent to DFAS. After reading through it, AND the appropriate tax law, the IRS gives a VERY SPECIFIC example of where BOTH should be tax free. This is listed as Example 19 from the IRS Publication 525, page 19. Not sure that it gets much clearer than this...

Example 19. You retired in 2014 and receive a pension based on your years of service. On August 3, 2020, you receive a determination of service-connected disability retroactive to 2014. Generally, you could claim a refund for the taxes paid on your pension for 2017, 2018, and 2019. However, under the special limitation period, you can also file a claim for 2016 as long as you file the claim by August 3, 2021. You can't file a claim for 2014 and 2015 be-cause those tax years began more than 5 years before the determination.

Thoughts from the group?