Navy Disability Pay: DoD Retirement, VA Rates, and Filing

Navy disability pay comes from two separate systems that can pay a sailor or veteran at the same time. If you are medically separated or retired from the Navy, the Department of Defense pays disability retired pay based on a rating it assigns during the Integrated Disability Evaluation System. Separately, the Department of Veterans Affairs pays tax-free monthly compensation for any condition connected to your service, from about $180 a month at a 10% rating up to $3,938.58 at 100% for a single veteran in 2026. Whether you can collect both checks in full, or whether one offsets the other, depends on your years of service, your VA rating, and whether your injuries are combat-related.

The Two Paychecks: DoD Retirement and VA Compensation

The DoD side pays you for being medically unfit to continue serving. It is administered by the Defense Finance and Accounting Service, uses a rating capped at 75%, and is generally taxable. The VA side pays you for the lasting effect of a service-connected condition on your civilian life. It uses a rating from 0% to 100% in 10-point steps, is tax-free at both federal and state levels, and continues for as long as the condition warrants.¹

A sailor who separates without a medical retirement generally deals only with the VA. A sailor who is medically retired deals with both, and the interaction between the two — called concurrent receipt — is where most of the money questions live.

The Navy Disability Evaluation Process

Before a Navy service member separates on a disability, the DoD and VA run a joint review called the Integrated Disability Evaluation System, or IDES. It produces disability ratings from both agencies using a single set of medical exams.²

Medical Evaluation Board

IDES starts when a Navy physician decides a service member has a condition that may prevent them from meeting medical retention standards. A Medical Evaluation Board reviews the record and decides whether to refer the case forward. The MEB itself does not discharge anyone; it is a screening step.³

Physical Evaluation Board

The Physical Evaluation Board makes the formal fitness decision. An Informal PEB reviews the record first. A member who disagrees can request a Formal PEB, appear in person, present evidence, and be represented.²

After the PEB, one of five things happens: return to duty, separation without benefits, separation with severance pay, placement on the Temporary Disability Retired List, or placement on the Permanent Disability Retired List. A DoD rating of 30% or higher qualifies for disability retirement. A rating of 20% or below results in severance pay rather than a retirement.²

How Navy Disability Retired Pay Is Calculated

Navy members medically retired under Chapter 61 of Title 10 receive disability retired pay computed under whichever of two formulas pays more:⁴

Disability percentage method: the DoD rating (capped at 75%) multiplied by the retired pay base.
Longevity method: years of creditable service times 2.5% (or 2.0% for those who entered service on or after January 1, 2018), multiplied by the retired pay base.

The retired pay base is either final basic pay or the average of the highest 36 months of basic pay, depending on when the member first entered service. Anyone who entered on or after September 8, 1980, uses the High-3 average.⁵

Members placed on the Temporary Disability Retired List receive at least 50% of base pay while their condition is periodically re-evaluated for up to five years.⁴

Who Qualifies for VA Disability Compensation

Three things have to be true: you have a current physical or mental condition, you served on active duty (or active or inactive duty for training), and you can show the condition is connected to that service. The connection can be direct (an injury or illness caused in service), an aggravation (a pre-service condition made worse by service), or a delayed onset that traces back to active duty.⁶

Discharge status matters. Honorable and general discharges qualify. Other-than-honorable, bad-conduct, and dishonorable discharges may bar benefits, though a discharge upgrade or a VA Character of Discharge review can open the door.⁶

The VA compensates a broad range of physical and mental conditions, including hearing loss, tinnitus, back and joint problems, breathing conditions, PTSD, depression, traumatic brain injury, and conditions related to military sexual trauma. Navy service tends to bring heavy exposure to loud machinery, aircraft engines, and weapons systems, which is why hearing loss and tinnitus rank among the most commonly awarded service-connected disabilities.⁷

The PACT Act and Presumptive Conditions

The PACT Act, signed in August 2022, made it easier for veterans exposed to burn pits, Agent Orange, and other toxins to get compensation. It designates certain cancers and respiratory illnesses as “presumptive,” meaning the VA assumes the condition was caused by service if you served in a covered location and time period. Covered locations include Afghanistan, Iraq, Kuwait, Saudi Arabia, Syria, and the Persian Gulf during designated periods. If you were previously denied for a condition that is now on the presumptive list, you can file a Supplemental Claim.⁸⁹

2026 VA Monthly Rates

A 2.8% cost-of-living increase took effect December 1, 2025, under the Veterans’ Compensation Cost-of-Living Adjustment Act of 2025.¹⁰ Monthly rates for a single veteran with no dependents are:¹¹

10%: $180.42
20%: $356.66
30%: $552.47
40%: $795.84
50%: $1,132.90
60%: $1,435.02
70%: $1,808.45
80%: $2,102.15
90%: $2,362.30
100%: $3,938.58

Veterans rated at 30% or higher get additional amounts for dependents. At 100%, a veteran with a spouse receives $4,158.17 a month; with a spouse and one child, $4,318.99. Ratings of 10% and 20% pay the same regardless of dependents.¹¹

How Multiple Ratings Combine

Two service-connected conditions do not add together the way you might expect. The VA uses a combined ratings table based on the idea that each disability reduces what remains of your capacity, then rounds to the nearest 10%. Two 10% ratings combine to 19%, which rounds to 20%. The gap between simple addition and the combined figure grows at higher ratings.¹²

A few rules cut in the veteran’s favor. When a disability falls between two rating levels, the higher one applies. When reasonable doubt exists about the degree of disability, that doubt is resolved for the veteran. A condition not listed in the Schedule for Rating Disabilities (38 CFR Part 4) can be rated by analogy under a closely related condition.¹³ For a pre-service condition that was aggravated by service, the VA pays only for the degree of worsening.¹²

When You Can Be Paid at the 100% Rate Without a 100% Rating

Total Disability Individual Unemployability, or TDIU, pays compensation at the 100% rate to veterans who cannot hold substantially gainful employment because of a service-connected condition. To qualify, you need either one disability rated at 60% or higher, or two or more disabilities with one rated at 40% and a combined rating of 70% or higher. Exceptions exist for frequent hospitalizations and other special situations. The application uses VA Form 21-8940 with work and education history.¹⁴

Special Monthly Compensation

Veterans with especially severe disabilities — limb loss, blindness, the need for daily aid and attendance — may qualify for Special Monthly Compensation, which pays above the standard 100% rate. SMC is organized into lettered categories. Selected 2026 monthly rates for a single veteran with no dependents:¹⁵

SMC-K, an add-on for specific losses paid on top of other compensation: $139.87
SMC-S (Housebound): $4,408.53
SMC-L: $4,900.83
SMC-O/P: $6,877.12
SMC-R.1 (Aid and Attendance): $9,826.88
SMC-R.2/T: $11,271.67

Which level applies depends on the specific combination of impairments. SMC-L covers cases such as bilateral foot amputation or a need for daily aid and attendance. SMC-R covers veterans requiring regular personal assistance with eating, dressing, and bathing.

Getting Both Checks: Concurrent Receipt

Federal law historically forced military retirees to give up a dollar of retirement pay for every dollar of VA disability. Two programs now soften or eliminate that offset for qualifying retirees.

Concurrent Retirement and Disability Pay (CRDP)

CRDP allows retirees with a VA rating of at least 50% to receive full retirement pay and full VA disability pay with no offset. Regular retirees (those who retired based on years of service) have been fully eligible since January 1, 2014. Chapter 61 disability retirees qualify only if they completed at least 20 years of creditable service; those with fewer than 20 years remain subject to the full VA offset. No application is normally required because the VA shares rating data with DFAS.¹⁶

Combat-Related Special Compensation (CRSC)

CRSC pays tax-free amounts to retirees whose disabilities are tied to combat or combat-related activity. The rating threshold is only 10%, but the disability must be linked to armed conflict, hazardous duty, war simulation, an instrumentality of war, or a Purple Heart. It is available to retirees with 20 or more years, Chapter 61 retirees rated at 30% or higher, veterans covered by the Temporary Early Retirement Act, and those on the temporary or permanent disability retired lists. You apply on DD Form 2860 through your branch’s CRSC office. Back payments are limited to six years.¹⁷

Choosing Between the Two

If you qualify for both, you have to pick one. CRDP is taxable and pays based on your full VA rating. CRSC is tax-free but pays only on the combat-related portion. Which is worth more depends on how much of your rating is combat-related and on your tax bracket. DFAS sends an annual “Open Season” letter allowing retirees to switch their election for the following year.¹⁸

The Gap the Star Act Would Close

Chapter 61 disability retirees who served fewer than 20 years fall through both programs’ cracks: too little service for CRDP, and CRSC only helps the combat-related share. The Major Richard Star Act would extend concurrent receipt to combat-injured retirees regardless of length of service. The bill has been reintroduced in the 119th Congress as H.R. 2102 (330 cosponsors) and S. 1032 (80 cosponsors), with support from Defense Secretary Pete Hegseth.¹⁹ The Congressional Budget Office has estimated a cost of about $9.75 billion over ten years, benefiting roughly 50,000 disability retirees by an average of about $1,200 per month.²⁰ As of June 2026, the bill has not been enacted; Senate attempts to pass it by unanimous consent have been blocked six times.²¹

Taxes

VA disability compensation is fully tax-free at the federal and state level. You do not report it on a tax return. The same tax-free treatment applies to Special Monthly Compensation, Dependency and Indemnity Compensation, GI Bill payments, and clothing allowances.¹ DoD disability retired pay is generally taxable, though CRSC is tax-free.

The tax-free label is not the whole story for other purposes. Mortgage lenders count VA disability as income and often gross it up by as much as 125% because it is untaxed. Family courts generally count it for alimony and child support. Means-tested programs like Medicaid and Supplemental Security Income count it toward eligibility limits.²² If you previously paid tax on money that should have been treated as disability-related (for instance, after a retroactive rating increase), you may be able to recover it by filing an amended return.¹

How To File a VA Claim

Claims use VA Form 21-526EZ. You can file:²³

Online at VA.gov, which sets the effective date the moment you start the application.
By mail to the VA Claims Intake Center in Janesville, Wisconsin.
In person at a VA regional office.
With help from an accredited attorney, claims agent, or Veterans Service Organization.

Submitting an “intent to file” notice before your full application locks in an earlier effective date. Once you file, the effective date is generally the later of the date the claim was received or the date the condition arose. File within one year of separation from active duty and the effective date can be set to the day after separation.²⁴

As of February 2026, the VA’s average processing time for disability-related claims was roughly 76.6 days. Evidence gathering is the longest step, and adding evidence after that phase resets the clock.²⁵

Payments are deposited on the first business day of each month for the prior month. If the first falls on a weekend or federal holiday, the deposit lands on the last business day before it.²⁶

If You Are Denied

Under the Appeals Modernization Act, a denied veteran has three review paths, and all three must be requested within one year of the decision letter:

Supplemental Claim. Use this when you have new and relevant evidence, or when a change in law such as the PACT Act reopens the question. Average completion time as of February 2026: about 60.7 days.²⁷
Higher-Level Review. A senior reviewer re-examines the existing record for errors. No new evidence is allowed, but you can request an informal conference. VA goal: 125 days.²⁸
Board Appeal. A Veterans Law Judge reviews the case, with three docket choices: direct review (goal 365 days), evidence submission (goal 550 days), or hearing (goal 730 days). Hearing-docket appeals averaged over 790 days in fiscal year 2025.²⁹

A Board decision can be appealed to the U.S. Court of Appeals for Veterans Claims within 120 days.²⁹

A Note on Survivors

Navy disability pay stops at the veteran’s death, but a surviving spouse or dependent child may qualify for Dependency and Indemnity Compensation if the death was service-connected. The 2026 base rate for a surviving spouse is $1,699.36 per month for deaths on or after January 1, 1993, with add-ons for dependent children, aid and attendance, and housebound status. The SBP-DIC offset was fully eliminated on January 1, 2023, so survivors receive Survivor Benefit Plan and DIC payments in full.³⁰

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