Combat Wounded Vets May Recoup Withheld Severance Taxes

December 22, 2016

The president recently signed Combat-Injured Veterans Fairness Act (Public Law 114-292), which allows veterans to collect severance taxes erroneously withheld by DoD.

A servicemember who suffers a combat-related injury and who is medically separated is entitled to a lump-sum disability severance payment, based on rank and years of service.

That payout is supposed to be tax-free. 

The National Veterans Legal Services Program (NVLSP) has been arguing for several years that the Pentagon has wrongfully deducted taxes out of the severance pay in spite of the law and the advice from several veteran legal advisory organizations.

NVLSP estimates the new law will benefit almost 14,000 individuals. For some, it will mean a windfall of thousands of dollars they should have received years ago.

The bill passed both the House and Senate without opposition.

The law requires the Secretary of Defense to issue a report to Congress on those who have been affected by the improper withhold of taxes, to include the amounts withheld, and provides those affected with the authority to file a claim for the wrongfully withheld taxes.

MOAA thanks Congress and the president for passing this important bill during the lame duck session.


Join Today

Not a member of MOAA? When you join MOAA, you become part of the strongest advocate for our military's personnel and their families. The stronger our membership is, the stronger our voice becomes. Consider joining today because every voice counts.

Rate this content