DOD Retirement Pay Taxable?

Army101st

PEB Forum Regular Member
Registered Member
(Not CRSC but wasn't sure where to post this)
Is DOD Chapter 61 retirement pay taxable? I was told that it was, but on my Retiree Account Statement it say I'm exempt from taxes due to my disability status. Can anyone make sense of this?
 
DoD disability retired pay should not be included in taxable income if:

You receive disability payments for a combat-related injury. This is a personal injury or sickness that:
  • Resulted directly from armed conflict,
  • Took place while you were engaged in extra-hazardous service,
  • Took place under conditions simulating, including training exercises such as maneuvers, or
  • Was caused by an instrumentality of war.
Ron
 
(Not CRSC but wasn't sure where to post this)
Is DOD Chapter 61 retirement pay taxable? I was told that it was, but on my Retiree Account Statement it say I'm exempt from taxes due to my disability status. Can anyone make sense of this?

I found this on the DFAS site for your reference. Ron P
Is it Taxable?
For many military retirees, the pay they receive each year is taxable. But, like everything in life, there are always exceptions.

The following list of deductions and exemptions are some of the more common concerns among military retirees:

Survivor Benefit Plan and Retired Serviceman's Family Protection Plan Premium Deductions: Premiums paid to fund survivors’ benefits under these plans are treated as deductions from your taxable income.

Debt Deductions: Amounts collected to recoup overpayments of retired pay, retroactive Survivor Benefit Plan premium adjustments and some retroactive Department of Veterans Affairs payments are treated as deductions from your taxable income.

Upon completion of debt repayments, DFAS will mail you a tax certificate stating that you have repaid a valid debt over a specific period and stating the amount repaid. You can then use that certificate to adjust tax returns filed during the repayment period by claiming a deduction for the amount paid.

TDRL/PDRL Exemption: If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
  • You were in the military or under a contractual obligation to join the military on September 24, 1975, or
  • Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.

VA Compensation Deduction: For most members who retired under a non-disability law, retired pay taxable income is simply reduced by the amount of any VA compensation received. For members who retired under the Temporary Disability Retired List or the Permanent Disability Retired List, retired pay taxable income is reduced by whichever of the following is greater:
  • The amount of VA compensation received or
  • A tax-exempt amount of gross pay determined by the following formula:
Step 1:
Military (not VA) disability percentage: %
x (times) Active Duty pay at the time of retirement:
= (equals) Initial amount of tax-exempt gross pay

Step 2:
Initial amount of tax-exempt gross pay:
x (times) applicable Cost-Of-Living-Adjustment (COLA): %
= (equals) Current tax-exempt gross pay

This information is reported by DFAS on your 1099-R.
 
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