VA Disability Compensation and Military Retirement Pay: Can You Receive Both?

For decades, veterans who received military retirement pay had their retirement reduced dollar-for-dollar by any VA disability compensation they received. It was an either/or situation for most retirees — you could collect both checks, but the total amount was the same as collecting one. That policy has largely changed, but the rules are still complex enough that many veterans don't realize what they're entitled to.

The Old Rule — Dollar-for-Dollar Offset

Prior to recent legislation, the law required that VA disability compensation be offset against military retired pay. A retiree receiving $2,400/month in retirement and $800/month in VA compensation would net the same $2,400 total — the VA payment replaced $800 of the retirement pay rather than adding to it. This was called the VA waiver, and it frustrated veterans for generations.

Concurrent Retirement and Disability Pay (CRDP)

Congress created the Concurrent Retirement and Disability Pay (CRDP) program, which phases out the offset for eligible retirees. To qualify for CRDP, you must be a regular retiree (20+ years of service) with a VA disability rating of 50% or higher.

Under CRDP, your military retirement is restored to its full amount and paid alongside your VA disability compensation. A retiree with 22 years of service, a $2,400/month pension, and $1,200/month in VA compensation at 70% rating would receive both — a combined $3,600/month.

CRDP is taxable. Military retirement pay is generally taxable income, and CRDP restoration increases the taxable portion of your retirement.

Combat-Related Special Compensation (CRSC)

CRSC is a separate program for retirees whose disability is combat-related. It covers disabilities incurred in combat, combat training, hazardous duty, or as a result of an instrumentality of war. CRSC allows concurrent receipt even for retirees with ratings below 50% and for Chapter 61 disability retirees — a group not covered by CRDP.

Unlike CRDP, CRSC is not taxable. For veterans with combat-related conditions, CRSC can result in a higher net payment even when the gross amount is similar to CRDP.

You cannot receive both CRDP and CRSC simultaneously. Each year you must elect one or the other. Most retirees benefit from comparing both amounts annually, as the better choice can change when ratings change.

Chapter 61 Medical Retirement and the Special Rules

Veterans who are medically retired under Chapter 61 (disability retirement) before completing 20 years face different rules. If your disability retirement pay is less than what you would have received for a 20-year retirement, you're only allowed concurrent receipt up to that 20-year equivalent amount. CRSC remains available without that cap for combat-related disabilities.

This distinction matters for veterans medically retired with high disability ratings but short service — their CRDP may be partially offset even under the current rules.

How to Apply

CRDP is administered by DFAS (Defense Finance and Accounting Service) and is applied automatically once your VA rating meets the 50% threshold. You don't need to apply separately — DFAS coordinates with the VA and adjusts your payments. You should see the change reflected in your retirement pay within a few months of your rating decision.

CRSC requires an application to your branch of service. You submit a DD Form 827 or the service-specific equivalent with documentation supporting the combat-related nature of your disability. Decisions can take several months, and retroactive pay is typically limited to six years.

State Tax Exemptions on Top of Federal Benefits

Many states exempt military retirement pay, VA disability compensation, or both from state income tax. If you live in a state with income tax, this is worth verifying — it can meaningfully increase your net income. Several states that previously taxed military retirement have eliminated that tax in recent years.

Not sure whether CRDP or CRSC is the better election for your situation? The calculation depends on your disability rating, service years, and whether your conditions are combat-related. We cover the comparison in detail in our CRDP vs CRSC guide.