VA back pay, or retroactive pay, is a lump sum covering the period between your effective date and the date the VA grants your claim. Because claims often take a year or more to decide, back pay can be substantial. It is paid tax-free in a single deposit.
How is my VA effective date determined?
Your effective date is usually the date you filed your claim. Under the intent-to-file rule you can lock in a date up to a year earlier. For claims filed within one year of separation, the effective date can be the day after discharge.
No. Like ongoing VA disability compensation, retroactive back pay is completely tax-free. You do not report it as income even though it arrives as a large one-time payment.
Yes. If you previously received military disability severance pay or certain separation pay for the same condition, the VA generally recoups that amount from your back pay before releasing the balance to you.