As the popularity of cryptocurrency grows, many veterans have started investing in digital assets like Bitcoin and Ethereum. If you’re a veteran receiving VA benefits such as Total Disability Individual Unemployability (TDIU), you might wonder if cryptocurrency investments impact your benefits. Here’s what you need to know.
What Are Cryptocurrencies?
Cryptocurrency refers to digital or virtual money represented as tokens or coins. Unlike traditional currencies, cryptocurrencies operate on decentralized systems using blockchain technology, meaning they are not controlled by the U.S. Treasury or traditional banking institutions.
Some well-known cryptocurrencies include:
- Bitcoin – The most recognized and widely used cryptocurrency.
- Ethereum – A leading platform for decentralized applications.
- Dogecoin – Initially created as a meme but gained popularity in recent years.
- Litecoin and Cardano – Known for their unique blockchain features.
Cryptocurrencies are often viewed as an investment or alternative asset. Investors acquire cryptocurrencies through mining, direct purchase, or exchanges and may use them for transactions, trading, or holding as assets.
Does Cryptocurrency Affect VA Benefits?
The short answer: No, investing in cryptocurrency is unlikely to affect your VA benefits, including TDIU.
VA disability compensation, including TDIU, is not influenced by passive income sources like cryptocurrency investments. Here’s why:
Active vs. Passive Income
- Active income is earned through employment, self-employment, or contracting work. This type of income can affect benefits like TDIU because it demonstrates the ability to work and earn a living wage.
- Passive income, on the other hand, includes earnings from investments such as stocks, bonds, rental properties, royalties, and cryptocurrencies. Passive income is not considered “earned income” by the VA and therefore should not impact your benefits.
Things to Keep in Mind When Investing in Crypto
While cryptocurrency investments don’t affect your VA benefits, there are important factors to consider:
- Record-Keeping: If you’re converting cryptocurrency into cash or using it for large purchases, such as a home, keep thorough documentation to avoid potential legal or financial issues.
- Volatility: Cryptocurrency values are highly volatile and can fluctuate dramatically in short periods. Ensure you’re prepared for the risks involved.
- Tax Implications: The IRS treats cryptocurrency as property rather than currency. Any profits from selling crypto are subject to capital gains taxes, depending on how long you’ve held the asset. Consult a tax professional to understand your obligations.
Does Cryptocurrency Impact Other VA-Related Areas?
While cryptocurrencies do not directly affect disability benefits, veterans using cryptocurrency for specific purposes—such as a VA loan—may face additional documentation requirements. For example, converting crypto into cash for closing costs on a VA loan requires a clear paper trail to verify ownership and source of funds.
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