What does your VA disability compensation carry?
By Kyle Melvin · NMLS #1486450 · REV Mortgage
Short answer
VA disability compensation is set by rating and dependents, paid monthly, and not taxed. On a VA loan it counts as income in full, most lenders gross it up because it is tax-free, and any compensable rating exempts you from the funding fee. That makes it one of the strongest incomes a lender sees — and unlike BAH it does not stop when you leave a station. The figure for your rating is below, next to what it carries as a home price with no down payment.
2026 VA disability compensation
$1,961 / month
70%, spouse. Tax-free; effective 2025-12-01. Rates adjust each December with the cost-of-living increase.
See what $1,961 carries as a home price →Counted as income in full and grossed up by most lenders; any compensable rating waives the funding fee.
2026 compensation by rating
Effective 2025-12-01 · Department of Veterans Affairs · monthly, tax-free
| Rating | Alone | With spouse | Spouse + 1 child |
|---|---|---|---|
| 10% | $180 | — | — |
| 20% | $357 | — | — |
| 30% | $552 | $617 | $666 |
| 40% | $796 | $883 | $948 |
| 50% | $1,133 | $1,242 | $1,323 |
| 60% | $1,435 | $1,566 | $1,663 |
| 70% | $1,808 | $1,961 | $2,074 |
| 80% | $2,102 | $2,277 | $2,406 |
| 90% | $2,362 | $2,559 | $2,704 |
| 100% | $3,939 | $4,158 | $4,319 |
At 70%, each additional child under 18 adds $76, a child over 18 in school adds $246, a dependent parent changes the base amount, and a spouse receiving Aid and Attendance adds $141. Below 30%, dependents do not change the amount.
Why this income is stronger than it looks
Lenders qualify you on stable, continuing income, and compensation is both: it does not end with a tour, and the underwriter does not need a two-year history of it. Because it is not taxed, most lenders gross it up — count it at more than its face value, the same adjustment they make to BAH — so $1,961 a month qualifies as though it were larger. And any compensable rating waives the funding fee entirely, which on a no-down-payment purchase is the largest closing cost there is.
It stacks. Compensation plus a civilian salary, plus retirement pay if you have it, plus a working spouse — the underwriter counts all of it. The residual income test is where a VA file actually passes or fails, and tax-free income helps there too, because it is counted after the tax that never came out.
The state matters more than for anyone else
A rating is also the key to state property-tax exemptions: at 100% (or unemployability) several states — Texas, Florida and Virginia among them — remove the property tax on a homestead entirely, and most of the rest exempt a fixed amount or a share scaled to the rating. That is a payment change the calculator cannot see until you set the tax rate, and the state benefit pages say exactly what each state does.
What the calculator does and does not know
The handoff below sends your compensation to the BAH-to-payment calculator as the monthly figure. It does not know your other income, your debts, or the county you are buying in unless you tell it — set the tax rate for the county, and if your rating qualifies you for an exemption, set it lower. What comes back is a budget, not a pre-approval; the pre-approval is the same file as anyone else's, and the process page walks it.
Apply with Kyle
Ready to use the benefit?
Send Kyle your rating letter and the state you are buying in. Compensation, the funding-fee exemption and the state's tax exemption go into the file from the start.