Veterans Can Now Claim a Refund on Taxes Paid on Disability Severance

The Defense Department has identified many veterans who may be eligible for a refund on the taxes paid on their disability severance payment. Most veterans who received a one-time lump-sum disability severance payment, when they separated from their military service, will receive a letter from the Department of Defense. If you have already received the letter, you would know it comes with detailed information on how to file for the refund. To help get you up to date, this blog will give you some information on the form you need to fill and its deadlines. Read on.

How Much to Claim?

Eligible veterans can claim a standard refund amount based on the calendar year, which is an individual’s tax year during which they received the severance payment. You have to explicitly mention “Disability Severance Payment” on line 15 of Form 1040X. On lines 15 and 22, you need to choose the standard refund amount, with the options being:

  • $1,750 for tax years 1991 to 2005
  • $2,400 for tax years 2006 to 2010
  • $3,200 for tax years 2011 to 2016

Form to Fill

To claim a refund, veterans need to file Form 1040X. They also need to mention either “Veteran Disability Severance” or “St. Clair Claim” across the top of the form’s first page. All amended returns need to be filed on paper, so you will have to mail the Form 1040X to the IRS office.


Applicants can file for a refund up to 1 year from the date of receiving a Defense Department notice; 3 years after the due date for filing the original return for the year the disability severance payment was made; or 2 years after the tax was paid for the year the disability severance payment was made.

Need Help Filing a Refund? Look No Further!

Whether you are looking to file a tax return or address an IRS tax debt related problem, the experienced tax attorneys at the Law Offices of Nick Nemeth can help.  Speak with one of our tax attorneys, today! To schedule an appointment, fill out our contact form or simply call (972) 426-2553.

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