When a service member divorces, military retirement pay and VA disability benefits both shape alimony, but federal law treats them very differently. A state court can divide retirement pay or use it to calculate spousal support, while VA disability compensation is off-limits as marital property yet still counts as income when a judge decides what the veteran can afford to pay. The size of the former spouse’s check often turns on how those two income streams interact, and on choices the veteran makes about waivers and disability restoration programs.
How Retirement Pay Factors Into Alimony
The Uniformed Services Former Spouses’ Protection Act, at 10 U.S.C. § 1408, lets state courts treat military retirement pay as marital property subject to division or as a source of income for calculating alimony and child support.1Office of the Law Revision Counsel. 10 USC 1408 – Payment of Retired or Retainer Pay in Compliance With Court Orders Whether a portion of retirement pay is labeled alimony or property changes the legal and tax consequences, so the label in the decree matters.
Courts work with “disposable retired pay,” not the gross amount. Disposable retired pay is the monthly retirement check minus specific deductions defined by federal law: amounts owed to the government for prior overpayments, forfeitures ordered by court-martial, waivers taken to receive VA disability compensation, and Survivor Benefit Plan premiums.2Legal Information Institute. 10 USC 1408 – Payment of Retired or Retainer Pay in Compliance With Court Orders Federal income tax withholding is not part of that statutory formula, though many people assume it is. Every deduction that shrinks disposable retired pay also shrinks what a former spouse can receive.
Retirement pay is never automatically split at divorce. To get payments through the Defense Finance and Accounting Service (DFAS), the court order must identify the payment as alimony and state either a fixed dollar amount or a percentage of disposable retired pay. Without that precision, DFAS will reject it.
Why the COLA Wording Matters
The phrasing of the order also decides whether the former spouse keeps up with inflation. An award written as a percentage of disposable retired pay automatically picks up a proportionate share of every annual cost-of-living adjustment. An award written as a fixed dollar amount does not, and DFAS will not apply COLAs to a fixed figure even if the court order says to.3Defense Finance and Accounting Service. Garnishment – USFSPA FAQs Over twenty or thirty years, the difference compounds into thousands of dollars. A fixed monthly amount sounds cleaner in negotiation and quietly loses purchasing power for the rest of the payment period.
VA Disability Benefits: Protected, but Still Counted
VA disability compensation sits in its own legal category. Under 38 U.S.C. § 5301, these benefits cannot be assigned, seized, or attached by creditors, and they are exempt from taxation.4Office of the Law Revision Counsel. 38 USC 5301 – Nonassignability and Exempt Status of Benefits The Supreme Court reinforced this in Mansell v. Mansell (1989), holding that state courts cannot divide VA disability pay as community or marital property in a divorce.5Justia. Mansell v. Mansell, 490 US 581 (1989) No court can award a former spouse a percentage of a veteran’s disability check.
That shield has a limit. Most state courts count VA disability as income when they evaluate what a veteran can afford to pay in spousal support. The disability money increases the veteran’s total financial resources, and judges set alimony against the full picture. A court might set alimony at $1,500 a month after weighing both retirement pay and disability income, but the veteran writes that check from personal funds rather than having DFAS pull it from the disability benefit itself.
The VA Waiver and the Shrinking Retirement Pool
A military retiree who qualifies for VA disability compensation must waive an equal dollar amount of taxable retirement pay to receive the tax-free disability benefit. This dollar-for-dollar swap is the VA waiver.6Defense Finance and Accounting Service. VA Waiver and Retired Pay It shrinks the disposable retired pay pool that a former spouse’s percentage runs against, even though the veteran’s total income stays roughly the same. A retiree receiving $3,000 in retirement pay who then gets a $1,000 VA disability rating sees disposable retired pay drop to $2,000. If the former spouse was awarded 40% of disposable retired pay, the monthly check falls from $1,200 to $800.
The Supreme Court returned to this problem in Howell v. Howell (2017), ruling that state courts cannot order a veteran to indemnify or reimburse a former spouse for the reduction caused by a post-divorce VA waiver. Such orders were found to conflict with federal law because they effectively treat disability pay as divisible property through the back door. Courts can still adjust alimony upward to reflect the veteran’s overall financial capacity, since alimony is not tied to a specific carved-out piece of retirement pay.
What a court cannot impose after Howell, divorcing spouses can still agree to. An indemnification clause in a negotiated settlement is a contractual promise that the service member will keep the former spouse whole at a set payment level regardless of any future VA waiver. Several states have enforced these clauses on contract theory, distinguishing a court-imposed order (prohibited) from a voluntary agreement between parties (enforceable). For a spouse still negotiating a settlement with a veteran who has not yet claimed disability, this is one of the most valuable protections available.
CRDP and CRSC: Two Restoration Programs, Two Outcomes
Two federal programs partially undo the VA waiver, and each carries different consequences for a former spouse.
Concurrent Retirement and Disability Pay (CRDP) restores some or all of the retirement pay that was waived for VA disability compensation. Eligible retirees receive both their full retirement check and their VA disability payment, phased in over time. Because CRDP is classified as restored retirement pay, it is taxable and counts as disposable retired pay a court can divide. When CRDP kicks in, the former spouse’s share may grow because the divisible pool grows back toward its pre-waiver level.
Combat-Related Special Compensation (CRSC) works differently. It is a separate payment for disabilities caused by combat or combat-related activity, and it is not classified as retired pay, so courts cannot divide it as marital property. CRSC is, however, subject to garnishment for alimony and child support.7Defense Finance and Accounting Service. CRDP-CRSC-FAQs There is a practical wrinkle worth flagging. If a retiree switches from CRDP to CRSC, existing former spouse deductions from retired pay may be suspended when the retirement check no longer has enough left to cover them. The former spouse may need to go back to court to enforce the support obligation through garnishment of the CRSC instead.
A veteran cannot receive both CRDP and CRSC at the same time and must choose one. That single choice can shift money between accounts with very different legal exposure in a divorce, reshaping what a former spouse receives without changing the veteran’s total income by a dollar.
Federal Caps on What DFAS Will Withhold
Federal law limits how much of a retiree’s pay DFAS can divert to a former spouse. Under the USFSPA, the maximum DFAS can pay directly to a former spouse for property division is 50% of disposable retired pay. When a retiree owes both a USFSPA property division payment and a separate garnishment for alimony or child support under 42 U.S.C. § 659, the combined maximum rises to 65% of disposable earnings.8Defense Finance and Accounting Service. Maximum Payment Amount The two caps use different bases, so the arithmetic is not as clean as it looks. The retiree keeps at least 35% of disposable earnings when both obligations are in play.
These caps limit what DFAS will withhold, not what a court can order. If a judge sets alimony at an amount that exceeds what DFAS can pull, the veteran still owes the full amount, and the former spouse may need to pursue the balance through state court enforcement.
How Alimony Is Taxed
For divorce or separation agreements finalized after December 31, 2018, alimony is not deductible by the payer and not taxable to the recipient. This applies to all alimony, military or civilian. Agreements executed before 2019 still run under the old rules unless a later modification expressly adopts the new ones.9Internal Revenue Service. Topic No. 452, Alimony and Separate Maintenance
VA disability compensation stays tax-free to the veteran no matter how a court accounts for it when setting alimony. Military retirement pay, by contrast, is taxable. That asymmetry is part of why the VA waiver is financially attractive to veterans even as it complicates the former spouse’s share.
Survivor Benefit Plan Coverage
The Survivor Benefit Plan (SBP) pays a monthly annuity to a designated beneficiary after the retiree’s death. Without SBP coverage, military retirement payments stop the moment the retiree dies, and the former spouse gets nothing further from that income stream regardless of what the decree said. SBP functions as life insurance for the retirement benefit.
A retiree can elect former spouse SBP coverage, and many divorce agreements require it. The election must be submitted to DFAS within one year of the divorce, using DD Form 2656-1. If the retiree fails to make the election, the former spouse can request a “deemed election” through DFAS to preserve coverage. Missing this one-year window can permanently forfeit eligibility, which makes it one of the most time-sensitive items in any military divorce.
SBP premiums come out of gross retired pay before disposable retired pay is calculated, so they reduce the amount available for division. If the retirement check becomes too small to cover premiums, often because of a large VA waiver, DFAS may pull premiums from CRSC or require the retiree to pay by direct remittance. Any unpaid premium balance at the retiree’s death is deducted from the annuity before the beneficiary sees anything.10Defense Finance and Accounting Service. Paying for SBP
Getting Payments Directly From DFAS
To receive alimony directly from DFAS instead of relying on the veteran to write a check each month, a former spouse submits a completed DD Form 2293 (Application for Former Spouse Payments from Retired Pay) with a certified copy of the court order.11Defense Finance and Accounting Service. How to Apply for Payments Under the Uniformed Services Former Spouses’ Protection Act Standard photocopies are rejected. The court clerk has to certify the copy. The order itself must state that the payments are alimony and specify a fixed dollar amount or a percentage of disposable retired pay.
The application requires the service member’s Social Security number, and DFAS will not process the order without it.11Defense Finance and Accounting Service. How to Apply for Payments Under the Uniformed Services Former Spouses’ Protection Act A former spouse who does not have it, and whose ex refuses to provide it, may need to obtain it through discovery or a court order.
One widespread myth is worth dispelling. The “10/10 rule,” which requires a marriage of at least ten years overlapping with ten years of military service, applies only to property division of retired pay. It does not apply to alimony or child support, which can be enforced through DFAS regardless of how long the marriage lasted.12Defense Finance and Accounting Service. Uniformed Services Former Spouses’ Protection Act Legal Overview
Once the application is submitted, the service member gets 30 days to challenge the order, and no payments go out during that window. If no valid objection is raised, DFAS must begin payments within 90 days of receiving a complete application, coordinated with the monthly retirement pay cycle.3Defense Finance and Accounting Service. Garnishment – USFSPA FAQs Plan for up to three months without payments from this source while the application processes, and budget for that gap.