Starting in January, veterans will see a 5.9% increase in their monthly VA benefits. This is the biggest jump in benefits veterans have seen in a long time.
On October 8th, the president signed a bill that authorized this increase for disability compensation, clothing allowance, and Dependency and Indemnity Compensation payments.
The Department of Veterans Affairs modifies veterans’ monthly disability compensation amounts every year to match the annual change in the cost of living as determined by the Social Security Administration.
Projected VA COLA for 2023
The cost of living adjustment for VA disability payments is currently projecting to be around a massive 8% – 10% increase. While this is not official yet, we should know more by October – November 2022.
How much is the VA COLA in 2022?
The 5.9 percent COLA boost that was announced in November will be applied to December 2021 compensation payments, and it will be reflected in January 2022 compensation payments.
In the previous two years, COLA rises have been less than 2% on average. The 2022 adjustment is the biggest raise since nearly 40 years. Veterans with a 100% disability rating and no dependents will see their VA compensation rise by $185 per month.
What are cost of living adjustments?
A cost-of-living adjustment is an increase of income so that the recipient can keep up with increasing basic living costs in relation to this “thing” called the CPI.
What is the CPI? The Department of Labor’s (DOL) Bureau of Labor Statistics (BLS) tracks the Consumer Price Index (CPI).
Do Cost of living adjustments affect my taxes?
Again, each individual’s circumstances are different. It may be in your best interest to seek professional guidance for your tax questions. However, there are some general guidelines provided here to address this issue.
As a general rule, disability compensation and pension benefits paid to a Veteran or their families are excluded from federal taxable income; military retirement based on disability is also excluded from federal taxable income (if the Veteran meets certain criteria – click HERE to see criteria). DIC benefits are tax-free as well.
However, military retirement based on age or length of service is taxable income.
It is worthwhile to note that there are special tax considerations for Veterans, including possible refunds after a Veteran receives a determination of a service-connected disability. Click HERE for the IRS explanation.
What to do to receive new COLA 2022
Nothing! Cost of living adjustments do not require any additional application from benefit recipients. You do not need to request or apply for them. Although an increase certainly does not happen every year, if an increase is determined, benefit recipients will automatically receive it. Finally, if you feel you are deserving of a higher rating for your VA disability, please talk to us!
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