So I filed my VA claim back in November after my October diagnosis and I've been wondering about the tax side of this since the paperwork started moving. Got some answers from the VA rep handling my case and wanted to lay it out because I know other guys are gonna ask the same thing.
VA disability compensation itself is not taxable. That's federal law, straight up. If I get approved for service connection on the meso claim, whatever monthly payment comes in is tax free. That part's clean.
But here's where it gets messy. If there's a settlement from a lawsuit against a manufacturer or company that exposed me, that money can be taxable depending on how it's structured. Some of it might be considered compensatory damages which aren't taxed, but other portions could be. The VA rep told me to talk to a tax guy about that piece because it depends on what the settlement covers and how the lawyers structure it.
I also asked about the retroactive pay if my claim gets approved and they backdate it to my diagnosis in October. That's still not taxable even going back that far.
The thing that frustrated me is the VA rep wasn't totally clear on the settlement side, which makes sense because that's not their department. I'm planning to get a CPA who handles veteran claims to walk through it once my case actually moves. Don't want any surprises.
Anyway if you're filing a VA claim for meso don't stress the VA payment part being taxable. But if you're also looking at a lawsuit settlement, get a professional to review that specific paperwork.