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| Many pensions are non-taxable, and you often have to point it out to the IRS. |
Military and Government Disability Pensions
(from the IRS Code)
Certain military and government disability pensions are not taxable.
Service-connected disability. You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services.
The armed forces of any country.
The National Oceanic and Atmospheric Administration.
The Public Health Service.
The Foreign Service.
Conditions for exclusion. Do not include the disability payments in your income if any of the following conditions apply.
You were entitled to receive a disability payment before September 25, 1975.
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.
You receive the disability payments for a combat-related injury. This is a personal injury or sickness that:
Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service,
Takes place under conditions simulating war, including training exercises such as maneuvers, or
Is caused by an instrumentality of war.
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.
(If you receive one of the above pensions, especially, pensions at an outside company or other government job, which is not a VA service-connection pension, but based on a VA service-connected disability...then, you may have to point that out to the IRS. There are thousands of pages of IRS rules, and most of the employees don't know what all of them are. If you are currently paying taxes on a pensions that meets the above criteria, petition the IRS for tax relief under the code.)
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