Disability Income?

How does a VA disability settlement affect your taxes?

QUESTION: Kevin received a settlement from the VA for disability income.  Does he have to report that as income when filing taxes?

ANSWER: Check with your local CPA to be certain.  However, traditionally if disability income was bought with after-tax income it will not be taxable.  If you bought it with pre-tax income, then it will be taxable.  In this case, since the VA is paying it out it’s probably taxable.