Military disability severance pay is 2 months of basic pay for each year of service, paid to a member separated for a disability that is generally rated below 30 percent, with less than 20 years of service. The law counts at least 3 years, or 6 years when the disability came from a combat zone or combat-related operations, and no more than 19. This military disability severance pay calculator applies those rules, shows how the years are rounded, and estimates how long VA would withhold compensation to recoup the payment.
It follows 10 U.S.C. 1212 and the Department of Defense Financial Management Regulation, and it uses 2026 VA compensation rates for the recoupment estimate.
Basic pay for your grade on the separation date. The default is the 2026 E-6 rate for over 10 years.
Disability severance pay = 2 x monthly basic pay x years of service (at least 3 or 6, at most 19)
Under 10 U.S.C. 1212, the pay is the member's years of service multiplied by twice the monthly basic pay. The basic pay is the highest of four amounts: the grade held on the date of separation (or the date placed on the temporary disability retired list), a higher temporary grade served in satisfactorily, or the permanent or temporary grade the member would have been promoted to had the disability not been found. Each is priced at the basic pay rate on the date of separation or placement on the list.
The DoD Financial Management Regulation (Volume 7A, Chapter 35) sets out the counting:
| Service at separation | Years used, other disability | Years used, combat zone or combat operations |
|---|---|---|
| 1 year, 4 months | 3 (minimum) | 6 (minimum) |
| 4 years, 5 months | 4 | 6 (minimum) |
| 4 years, 6 months | 5 (rounded up) | 6 (minimum) |
| 7 years, 7 months | 8 | 8 |
| 18 years, 9 months | 19 | 19 |
| 19 years, 6 months | 19 (maximum) | 19 (maximum) |
Based on 10 U.S.C. 1212(b) and (c). Your separation orders state the combined years of active service and inactive-duty points to be counted.
The Financial Management Regulation gives this example: an E-6 with 11 years, 4 months and 9 days of active service and 76 inactive-duty points. The service is 11.3583 years plus 76 / 360 = 0.2111 years, or 11.5694 years in total. Because the fraction is 0.5 or more, it rounds up to 12 years, and the severance pay is 12 times 2 months of E-6 basic pay for over 10 years.
At the 2026 rate for an E-6 over 10 years, $4,759.50 a month under Schedule 8 of Executive Order 14368 (effective January 1, 2026), that is 12 x 2 x $4,759.50 = $114,228. Those are the calculator's default inputs.
Under 10 U.S.C. 1203, a member found unfit because of a physical disability may be separated with severance pay when the Secretary finds that the member has less than 20 years of service, the disability is not the result of intentional misconduct or willful neglect, it is or may be permanent, and it is rated less than 30 percent under the VA rating schedule, among other conditions. Members with at least 20 years of service, or with a disability rated at least 30 percent that meets the other conditions, may be retired under 10 U.S.C. 1201 instead. Reserve and Guard members are credited with the years they would count under 10 U.S.C. 12733, which is why points matter.
For points, the regulation caps credit for activities other than active service or funeral honors at 60 points for anniversary years that closed before September 23, 1996, 75 for years that closed on or after that date, 90 for years that close on or after October 30, 2000, and 130 for years that close on or after October 30, 2007.
Severance pay and VA compensation for the same disability are not both kept. Under 10 U.S.C. 1212(d), the amount of disability severance pay is deducted from VA compensation for the same disability. Two exceptions apply: no deduction for a disability incurred in line of duty in a combat zone or during combat-related operations, and no deduction from death compensation paid to dependents after the member's death.
VA's rules in 38 CFR 3.700(a)(3) explain how it works:
In the example above, if VA rates the severance-pay disability at 10% ($180.42 a month in 2026) and no tax was withheld, it would take 634 months to recoup $114,228, while a veteran with a 30% combined rating would still receive $372.05 a month. At 20% for that disability, it would take 321 months. VA rates follow the Social Security cost-of-living adjustment each December 1, so the real period will differ somewhat.
The regulation says disability severance pay is normally taxable income. It is not subject to tax withholding or reporting if either condition applies:
If VA awards compensation after the payment, the member may ask DFAS for a refund of the tax withheld when the VA notice comes in the same tax year, and must go to the IRS when it comes in a later year. In 2016, Congress found that since 1991 DoD had improperly withheld taxes from severance pay for wounded veterans, and the Combat-Injured Veterans Tax Fairness Act of 2016 required DoD to identify those payments and extended the time to claim refunds.
Once VA rates your disabilities, the VA disability calculator estimates your combined rating and monthly payment. If a disability gets worse after separation, the VA SMC rates calculator covers special monthly compensation, and survivors can check VA DIC rates.
Multiply twice your monthly basic pay by your years of service. A part year of 6 months or more counts as a full year, the minimum is 3 years (6 for a combat zone or combat-related operations disability), and the maximum is 19 years.
Usually yes. VA deducts the severance pay from compensation for the same disability, minus federal income tax withheld if it was paid after September 30, 1996. There is no deduction for a disability incurred in a combat zone or combat-related operations.
It is normally taxable, but no tax is withheld or reported when it results from a combat-related injury, or when the member is entitled to VA compensation or has a proposed VA rating through the Integrated Disability Evaluation System at separation.
A member found unfit because of a disability, with less than 20 years of service and a disability rated less than 30 percent that meets the other conditions in 10 U.S.C. 1203, may be separated with severance pay rather than retired.
Inactive-duty points are divided by 360 and added to active service. The DoD regulation caps the points credited for activities other than active service or funeral honors in each anniversary year.
It depends on the amount and the rating. VA withholds up to the monthly compensation for the severance-pay disability until the full amount is recovered, which can take many years at a 10% or 20% rating.