Are VA disability benefits taxable?

VA disability benefits are not taxable, according to the Internal Revenue Service. This includes disability compensation and pension payments for disabilities paid either to veterans or their families, grants for motor vehicles for certain disabled and vision-impaired veterans and grants for homes designed for wheelchair living.

Benefits under a dependent-care assistance program for veterans are also VA disability benefits that are not taxable. However, military retirement pay based on age or length of service is taxable according to the U.S. Army. The amount that a retiree pays to participate in the Survivors Benefit Plan is excludable from taxable income. Military retirement pay must be included as income for Federal income taxes.