Hello
@SRVC_CMPLT
I agree that this has been a good discussion and I have learned a few things from it.
My characterization of CRDP for a CH 61 retiree as being solely non-disability retired pay is incorrect. The computation for CRDP in such cases includes a ceiling of the dollar amount of the longevity portion of retired pay, but that does not change the fact that some or all of it is disability retired pay, restored. Bottom line:
If your retired pay is non-taxable, your CRDP is also non-taxable.
Reference:
Defense Finance and Accounting Service > RetiredMilitary > manage > taxes > isittaxable <---LINK
See this extract from DFAS:
Is it Taxable?
For many military retirees, the pay they receive each year is taxable. But, like everything in life, there are always exceptions.
The following list of deductions and exemptions are some of the more common concerns among military retirees:
Survivor Benefit Plan and Retired Serviceman's Family Protection Plan Premium Deductions: Premiums paid to fund survivors’ benefits under these plans are treated as deductions from your taxable income.
Debt Deductions: Amounts collected to recoup overpayments of retired pay, retroactive Survivor Benefit Plan premium adjustments and some retroactive Department of Veterans Affairs payments are treated as deductions from your taxable income.
Upon completion of debt repayments, DFAS will mail you a tax certificate stating that you have repaid a valid debt over a specific period and stating the amount repaid. You can then use that certificate to adjust tax returns filed during the repayment period by claiming a deduction for the amount paid.
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**TDRL/PDRL Exemption:If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions:
- You were in the military or under a contractual obligation to join the military on September 24, 1975, or
- Your military disability rating is combat-related
The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service.
**VA Compensation Deduction:For most members who retired under a non-disability law, retired pay taxable income is simply reduced by the amount of any VA compensation received. For members who retired under the Temporary Disability Retired List or the Permanent Disability Retired List, retired pay taxable income is reduced by whichever of the following is greater:
- The amount of VA compensation received or
- A tax-exempt amount of gross pay determined by the following formula:
Step 1:
Military (not VA) disability percentage: %
x (times) Active Duty pay at the time of retirement: [note: should be
High-3: If you entered active or reserve military service after September 7, 1980, your retired pay base is the average of the highest 36 months of basic pay. ]
= (equals) Initial amount of tax-exempt gross pay
Step 2:
Initial amount of tax-exempt gross pay:
x (times) applicable Cost-Of-Living-Adjustment (COLA): %
= (equals) Current tax-exempt gross pay
This information is reported by DFAS on your 1099-R.
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Combat Related Special Compensation (CRSC): These payments are non-taxable.
Concurrent Retirement Disability Payments (CRDP): CRDP is a restoration of your retired pay, not a separate entitlement.
Therefore, if your retired pay is taxable so is any CRDP payments you receive. If your retired pay is non-taxable, your CRDP is also non-taxable.
Former Spouse Deductions: The retiree is not liable for taxes on payments made to their former spouse. The Uniformed Services Former Spouse Protection Act defines community property payments established in accordance with a court order and approved by the DFAS legal department as pre-tax deductions.
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Ron
CC:
@Provis ,
@Guardguy11 ,
@chaplaincharlie ,
@Jason Perry
@SRVC_CMPLT