Your VA Disability Pay Cuts Your Retired Pay. Two Programs Can Restore It.
9 min read · Last updated October 22, 2026
- Military retired pay is reduced dollar for dollar by VA disability compensation under the VA waiver. Concurrent Retirement and Disability Pay (CRDP) restores that reduction in full, automatically, once a retiree’s VA rating reaches 50 percent.
- Combat-Related Special Compensation (CRSC) pays tax-free starting at a VA rating of just 10 percent, but only for disabilities tied to combat, hazardous duty, war-simulation training, an instrument of war, or a Purple Heart.
- A retiree cannot collect both CRDP and CRSC for the same disability at the same time. DFAS (the Defense Finance and Accounting Service) picks the higher-paying one automatically in the first year, then retirees must choose every year after during Open Season, usually held in January.
- CRSC requires filing a Department of Defense (DD) Form 2860 with your branch of service. CRDP needs no application in most cases once DFAS has your VA rating on file.
A military retiree who also draws VA disability compensation can recover some or all of the retired pay that compensation wipes out, through Concurrent Retirement and Disability Pay (CRDP), which restores the full reduction at a 50 percent VA rating, or Combat-Related Special Compensation (CRSC), a tax-free payment for combat-related injuries rated as low as 10 percent. A retiree draws only one at a time, and picking wrong, or missing the election window, costs real money.
In this article
- The VA waiver: why your retired pay gets cut in the first place
- Who qualifies: CRDP’s threshold vs. CRSC’s combat-related categories
- CRDP vs. CRSC: what each one actually pays
- How to apply: DFAS, DD Form 2860, and the annual Open Season
- How retirees lose money by picking wrong or missing Open Season
- Frequently asked questions
Consider a retired Army master sergeant named Dale Whitfield. He put in 22 years and draws $3,200 a month in gross retired pay. When the VA rates him 70 percent disabled, DFAS cuts that retired pay by $1,808.45 a month, the exact amount of his new VA compensation, and that reduction is simply the law, the starting point for everything else here.
The VA waiver: why your retired pay gets cut in the first place
Federal law bars a military retiree from collecting both full military retired pay and VA disability compensation for the same period. Instead, the retiree waives retired pay, dollar for dollar, in the amount of the VA compensation received. DFAS, the Defense Finance and Accounting Service, calls this the VA waiver, and the law behind it sits at Title 38 of the United States Code (U.S.C.), sections 5304 and 5305.
In plain terms: a $1,800 VA compensation check cuts $1,800 from gross retired pay. The waiver can’t push retired pay below zero. A larger VA amount just zeroes out the check and stops there.
Congress built two narrow exceptions. CRDP restores the waived amount for career retirees with a high enough VA rating, while CRSC replaces part of it with a separate, tax-free payment tied to combat. Both exist so a retiree who served long enough, or was hurt badly enough in combat, isn’t forced to forfeit retired pay to a VA rating increase.
Who qualifies: CRDP’s threshold vs. CRSC’s combat-related categories
CRDP’s bar is a single number: a combined VA disability rating of 50 percent or higher on the VA’s combined ratings table. Clear that bar and DFAS restores the full offset. Retirees who separated for disability under Chapter 61 face one extra condition: 20 years of creditable service.
CRSC’s bar is lower on paper, a VA rating of just 10 percent, but it narrows hard on what counts. The disability must trace back to one of these:
- Combat, including an occupation or raid
- Hazardous duty, such as demolition, flying, or parachuting
- Training that simulates war, such as live-fire exercises or hand-to-hand combat drills
- An instrument of war, such as a military vehicle, weapon, or chemical agent
- An injury that earned the retiree a Purple Heart
A retiree whose knees gave out from two decades of marching clears CRDP at 50 percent but not CRSC, since ordinary wear isn’t one of the five categories above. A retiree with a documented combat gunshot wound clears CRSC at a VA rating of just 10 percent.
Some veterans never reach a 50 percent schedular rating on their own conditions but still draw VA compensation at the 100 percent rate through Total Disability based on Individual Unemployability (TDIU). That interaction is handled case by case. Confirm directly with DFAS or your VA regional office rather than assuming either way.
CRDP vs. CRSC: what each one actually pays
CRDP doesn’t create a new payment. It shrinks the VA waiver itself, so more of a retiree’s existing retired pay flows back through, fully restored with no cap since January 1, 2014. Those dollars are retired pay, taxed the same way the rest of a retiree’s retired pay is taxed.
CRSC works differently. The retiree still waives retired pay dollar for dollar to receive VA compensation, exactly as the general rule requires, and CRSC then pays a separate amount on top, sized to the combat-related rating alone and capped at whatever retired pay the waiver took. That payment is federal-income-tax-free, unlike CRDP.
This is how it plays out for Dale, the retired master sergeant from earlier. His VA rating is 70 percent combined, worth $1,808.45 a month with no dependents, which waives his $3,200 retired pay down to $1,391.55.
Taking CRDP restores his full $1,808.45 waiver, so his retired pay goes back to $3,200 (taxable) on top of his $1,808.45 in VA compensation (never taxed): $5,008.45 total a month.
Now say only Dale’s post-traumatic stress disorder, tied to a roadside bomb attack on a 2019 deployment, is combat-related, and his branch rates that condition at 30 percent on its own, which pays $552.47 a month alone. Taking CRSC instead keeps his retired pay reduced at $1,391.55, keeps the same $1,808.45 in VA compensation, and adds $552.47 tax-free: $3,752.47 total a month.
CRDP pays Dale $1,255.98 more every month than CRSC would, even though CRSC is the tax-free option, because his combat-related rating (30 percent) is so much lower than his full combined rating (70 percent).
| Factor | CRDP | CRSC |
|---|---|---|
| Rating threshold | 50% combined VA rating or higher | 10% VA rating, but only on a combat-related disability |
| What it restores | The VA waiver itself, up to the full amount | A separate payment, capped at the amount waived |
| Taxability | Taxable, same as ordinary retired pay | Federal-income-tax-free |
| Application required? | No, in most cases; DFAS pays it once your VA rating is on file | Yes, DD Form 2860 filed with your branch of service |
| Best for | A retiree whose full combined rating is well above 50% and whose combat-related rating alone is lower or nonexistent | A retiree whose combat-related disabilities alone carry a high rating, especially one close to or above their overall combined rating |
How to apply: DFAS, DD Form 2860, and the annual Open Season
CRDP needs no separate claim in most circumstances. Because the VA shares disability-rating data with DFAS directly, DFAS starts paying CRDP once it confirms a retiree clears the 50 percent threshold, on the regular monthly pay schedule. A retiree who believes they qualify but isn’t being paid can file a written claim using DD Form 827.
CRSC is the opposite. A retiree must file DD Form 2860 with their own branch of service, not DFAS, along with service medical records from when the injury happened, official service records, VA rating decisions, and, where relevant, Purple Heart citations. The branch, not DFAS, decides whether a disability counts as combat-related, then forwards an approval to DFAS, which starts the payment and audits for any retroactive amount owed.
A retiree who qualifies for both in the same year doesn’t have to choose right away. DFAS automatically enrolls that retiree in whichever program pays the higher gross amount for the first year, then sends an election form with 45 days to switch if they want to. After that first year, the choice resets annually during Open Season, which DFAS typically holds in January, and switching requires acting during that window rather than waiting for DFAS to ask again.
How retirees lose money by picking wrong or missing Open Season
The costliest mistake is assuming CRSC’s tax-free status automatically makes it the better deal. It doesn’t, not when a retiree’s combat-related rating sits well below their full combined rating. Run both numbers, like Dale’s example above, before you decide, or you may be leaving money on the table every month.
The second mistake is letting the first 45-day election window close without acting. Miss it, and you’re stuck with whatever DFAS auto-selected until the next Open Season, which could be most of a year away.
The third mistake is treating Open Season as optional after your first election. If your VA rating goes up, or the VA adds a new combat-related condition to your file, the math behind your original choice can flip entirely, and nothing updates on its own. You have to re-run the comparison and file again.
One last factor worth naming: CRDP is retired pay, subject to the usual military pension-division rules a divorce decree can impose, while CRSC is special compensation, not retired pay, and typically isn’t divisible the same way. Raise that difference with whoever is helping you with a decree before you elect either program.
Frequently asked questions
Can I receive both CRDP and CRSC at the same time?
No. A retiree who qualifies for both can only draw one at a time for the same disability. DFAS automatically assigns the higher-paying program in your first year of dual eligibility, and after that you choose annually during Open Season, which usually runs in January.
Do I need to apply for CRDP?
Most retirees don’t. DFAS starts CRDP automatically once it has your VA disability rating on file and confirms you clear the 50 percent threshold. If you believe you qualify but aren’t being paid, file DD Form 827 with DFAS to submit a written claim.
What happens if I miss the 45-day election window after my first dual-eligibility year?
DFAS keeps you in whichever program it auto-selected for you. You won’t be able to switch again until the next CRDP/CRSC Open Season, typically held in January, so a missed window can cost you a year of the higher-paying option.
Does CRSC still apply if my combined VA rating is below 50 percent?
Yes, as long as the specific disability is combat-related under one of the five qualifying categories and your VA rating for it is at least 10 percent. CRSC’s threshold is separate from, and lower than, CRDP’s 50 percent combined-rating requirement.
Is CRSC back pay taxable the way CRDP back pay is?
No. CRSC payments, including any retroactive amount DFAS owes you, are federal-income-tax-free, by law. CRDP back pay is taxed the same way your ordinary retired pay is taxed, since CRDP restores retired pay itself rather than creating a separate, non-taxable benefit the way CRSC does.
