Category:
Pay & Allowances

Subcategory:
Taxes

Created:
2006-02-22

Modified:
2010-09-23

Disability Severance Pay and Taxes

Question

Am I entitled to get my taxes refunded on my disability severance pay and if so, how?

Answer

In accordance with Department of Defense Financial Management Regulation (DoDFMR) Volume 7A, Chapter 35, paragraph 350404, Disability severance pay is normally taxable.  If a member falls under one of the following conditions, then disability severance pay would be nontaxable:

  • On September 24, 1975, the individual either was a member of a uniformed service or was under a binding written commitment to become a member.
  • Entitlement resulted from combat-related injury or illness, as determined by the Secretary of the Military Service concerned.
  • Member has official notification from the VA approving entitlement to disability compensation for the same illness or injury that causes the entitlement to disability severance pay.
  • To receive reimbursement, the Service Member should submit their DD Form 214, Separation Orders, and VA award letter (if applicable) to their servicing DFAS Center (Soldier - DFAS-IN, Sailor- DFAS-CL, Airman -- DFAS-DE and Marine -- DFAS-KC).

    If a member (Soldier, Sailor, Airman, or Marine) answers "no" to all of the conditions above, then the Member must first apply for disability severance pay with the Department of the Veterans Administration (VA). If the VA awards the member compensation for the same illness and/or injury the Member must then submit their DD Form 214, Separation Orders and VA award letter to their servicing DFAS Center (active Air Force -- DFAS-DE, active Army and reserve Air Force and Army -- DFAS-IN, and active and reserve Navy and Marine Corps -- DFAS-CL).

    The respective mailing addresses are as follows: US Army: DFAS-Indianapolis DFAS-IN/ JFLACD 8899 E. 56th St. Indianapolis, IN 46249 Fax# (317) 275-0248 US Navy: Attention: Code JFLAH Defense Finance and Accounting Service-Cleveland Center 1240 East Ninth Street Cleveland, OH 44199-2055 US Air Force: DFAS-Indianapolis DFAS-JFLTAC 8899 E. 56th St. Indianapolis, IN 46249 US Marine Corps: DFAS-Cleveland Attn: JFLAFC 1240 East 9th Street Cleveland, OH 44199 To view the regulation, see the DoD Financial Management Regulation, Volume 7A, Chapter 35

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