Tax planning for veterans: your year-by-year map from Savant Wealth Management

What does tax planning for veterans cover?

Plenty of veterans assume all military income is taxed the same way. VA disability compensation and CRSC are tax-free and stay off the return, while service-based retired pay, including pay restored under CRDP at a 50% or higher rating, is taxable.

The work sorts each income line, picks pre-tax or Roth, checks HSA eligibility against TRICARE and flags the state question. It matters most when salary plus retired pay pushes last year's FICA wages from one employer above $150,000, which forces 2026 catch-up contributions into Roth.

When does the tax plan get reopened?

Veterans often believe a tax plan is finished once the return is filed. Savant Wealth Management rebuilds the map each February, after the DFAS 1099-R, the W-2 and Form 5498 arrive. An extra review starts on any of 4 triggers: a VA rating change (especially one that crosses 50% and turns on CRDP), a salary that starts or ends, a move to another state, or enrollment in a new employer health plan.

Read your tax map from Savant Wealth Management year by year

Many veterans figure that a high salary today means the bracket stays high. For most second-career retirees it doesn't. The map has one row for each year from now until RMDs start at 75, and each row lists every income source, taxable income, the decision due that year and its due date. Savant Wealth Management sends the decisions one at a time, in order of due date, with the numbers beside each.

For a hypothetical household of one, take Maureen: 52, single, a retired Air Force lieutenant colonel, civilian program manager at $165,000, 60% VA rating, $610,000 in a traditional TSP. For illustration, $60,000 of her retired pay is taxable. Her VA compensation is tax-free and stays off the return. From 52 to 59 she defers $24,500 pre-tax each year, so taxable income is $165,000 + $60,000 - $24,500 - $16,100 = $184,400.

At an assumed 24% rate, each deferral cuts the tax cost by $24,500 × 24% = $5,880. Over 8 years that is $47,040. At 60 the salary stops, and taxable income falls to $60,000 - $16,100 = $43,900 before any TSP withdrawals. Two rows carry the story: VA compensation adds $0 to taxable income in both columns, and taxable income falls by about three quarters once the salary ends.

Yes, the deferred dollars are taxed later. But on a much smaller base. Here's a quick test: if your taxable income, with VA compensation left out, will fall by more than half once the salary ends, pre-tax deferrals in the salary years usually come out ahead. Dollars deferred at 24% that later come out at 12% save 12 points; at 22%, only 2 points. Her $8,000 catch-up goes to Roth by rule, because last year's FICA wages topped $150,000. And like any TSP money, it can lose value, including what she put in.

If the 24% rate or the $60,000 of retired pay moves, the savings in the table move with them.

Savant Wealth Management builds the map, and you confirm the retired pay figure from the DFAS 1099-R. The map isn't a filed return, so whoever prepares your return still files it. Sizing Roth conversions for those low years is a separate decision with its own page.

What happens if a veteran tax due date slips?

A slipped due date costs real money when the fix can't wait. An HSA excess contribution carries a 6% excise each year it stays in the account, unless you withdraw the excess plus earnings by the return due date, extensions included. Wrongly taxed VA compensation can generally be fixed on Form 1040-X within 3 years of filing, and after that the refund is usually lost.

A new employer's benefits office that signs a TRICARE-covered retiree up for its high-deductible plan and HSA creates an excess contribution every year. At $4,400 each year, the 6% excise is $264 in year 1, $528 in year 2 on $8,800 and $792 in year 3 on $13,200, a total of $1,584, and the deductions are reversed too. Catch it at open enrollment by asking whether TRICARE is still active. Then pull the excess plus earnings out before the return due date.

For 2026, catch-up contributions must be Roth when the prior year's FICA wages from that employer exceeded $150,000, a rule from the IRS. Check your pay stub in January, because the plan applies it automatically.

IRA contributions for a tax year are due by the April filing due date, and RMDs start at 75 for anyone born in 1960 or later. Both go on the map as dated rows:

• HSA excess: withdraw by return due date
• Form 1040-X: within 3 years of filing
• IRA contribution: April filing due date
• RMDs: start at 75 if born 1960 or later

Separate tax-free VA pay yourself first

List every income source from the January forms. Check that VA compensation appears on no tax form and no return line, and see whether TRICARE still covers you before any HSA contribution. Call Savant Wealth Management when taxable income will change by more than half in one year (a salary ends or starts), when a rating changes, or when a Roth conversion question comes up. One limit: if your only income is retired pay and VA compensation and your TSP is small, a careful return helps more than a map.