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Military retired pay is subject to Federal taxes. If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA).
If based on your disability - you would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) – that amount is not taxable - Conditions for exclusion. Do not include the disability payments in your income if any of the following conditions apply.
1.You were entitled to receive a disability payment before September 25, 1975.
2.You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975.
3.You receive the disability payments for a combat-related injury. This is a personal injury or sickness that
4.You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA.