Separation pay payback planner

Took separation pay or severance when you left the military? VA usually takes that money back out of your disability compensation before it starts paying you. See how much, for how many months, and when full payments begin.

Plan your payback

An estimate, not a VA figure. Your decision letter lists the pre-tax amount of your payment, your gross monthly award, and what VA withholds each month, so use those numbers when you have them. Nothing you type leaves this page.

What kind of payment did you get?Separation pay (10 U.S.C. 1174)Special separation benefit (SSB) (10 U.S.C. 1174a)Disability severance pay (10 U.S.C. 1212)

VSI is not on this list because VA does not recoup it. See how it works below.

Date you were paid

The payment date decides whether tax comes off and which flat rate applies.

Enter the date you were paid.

Gross amount, before tax (dollars)

Enter the gross amount, more than zero.

Federal income tax withheldEstimate it for me (a flat rate based on the payment date)I know the amount

Monthly VA compensation, before any withholding (dollars)

Use the gross monthly amount on your decision letter. Dependents add to it.

Enter your monthly VA compensation, more than zero.

Or start from a rating

2026 veteran-alone rates, in effect from December 1, 2025. Picking one fills in the box above.

How much does VA withhold each month?All of my monthly compensationOnly part of it (severance pay often works this way)

First month VA pays your compensation (optional)

Fill this in to see the calendar month payments resume.

Does an exception apply?The disability VA pays me for started in a later period of service than the one that ended with this payment.

Is anything holding the withholding back?VA has not awarded me compensation yet.

Fill in the payment date, the gross amount, and your monthly compensation (or say VA has not awarded any yet) to see your plan.

What recoupment is

Recoupment is VA's word for repaying an earlier military payment out of a later benefit. The law lets you keep your disability compensation after taking separation pay or severance pay, but VA deducts what you already received (10 U.S.C. 1174(h)(2)). It withholds your monthly award, usually all of it, until the total is repaid. Your decision letter states the pre-tax amount of your payment, your gross monthly award, and what VA withholds each month. It is not a denial, and payments continue once the total is reached.

How much VA takes back

For separation pay and severance pay paid after September 30, 1996, VA recoups the gross amount minus the Federal income tax withheld (38 CFR 3.700). For payments on or before that date it recoups the full gross amount. SSB is recouped after tax whatever the date.

VA's records do not always show what was withheld, so it applies a flat rate by payment date: 20 percent through 1993, 28 percent from 1994, 27.5 percent from August 7, 2001, 27 percent from 2002, 25 percent from May 28, 2003, and 22 percent from 2018. These rates come from VA's claims manual, and VA's letter controls. The planner uses this table to estimate tax; an amount from your own records is better.

What VA does not recoup

Combat-related disability severance pay. If you separated under Chapter 61 on or after January 28, 2008, severance for a disability incurred in the line of duty in a combat zone or during combat-related operations is not recouped (10 U.S.C. 1212(d)(2)). DoD, not VA, decides whether your disability qualifies.
A disability from a later period of service. A payment is not deducted from compensation for a disability that began in a later period of active duty (10 U.S.C. 1174(h)(2)). The regulation words this for separation pay, so if you think it fits your SSB, ask VA.
VSI. VA does not recoup the voluntary separation incentive. DFAS reduces your VSI payments by the VA compensation you receive instead (10 U.S.C. 1175(e)).

When the payback waits

Some cases are deferred, not forgiven. VA takes severance pay only from compensation for the condition it covered, and only once that condition is rated 10 percent or more (M21-1, Part VI, Subpart ii, 2.3). While it is rated 0 percent or not rated, nothing is withheld, but if it is later rated 10 percent or more, VA recoups the balance (10 U.S.C. 1212(d)(1)). With no compensation award yet, the balance likewise waits for the award.

A worked example

You were paid $30,000.00 in separation pay on June 15, 2019, and let the planner estimate tax. The 22 percent flat rate gives $6,600.00, so VA recoups

3,400.00. Your award is

,132.90 a month (the 2026 rate at 50 percent, veteran alone) and VA withholds all of it.

That is 20 full months at $0, from November 2026 through June 2028, which repay

2,658.00. In month 21 VA withholds the last $742.00 and pays you $390.90. Full payments resume in August 2028.

What this planner does not do

It assumes one fixed monthly amount. Cost-of-living increases and rating changes can move the timeline, and your decision letter always controls. Some awards of voluntary separation pay (VSP) from the Air Force, Navy, and Marine Corps are withheld at 100, 75, or 50 percent of compensation depending on the rating, so enter the amount from your letter under "only part of it." DFAS separately recoups from military retired pay.

For separation pay and SSB, VA can reduce a withholding that takes all of your compensation if you show extreme financial hardship. It cannot for disability severance pay (M21-1, Part VI, Subpart ii, 2.7). Unsure of your monthly amount? The combined rating calculator shows the 2026 rate.

READY214 is an independent organizer, not a claims representative and not part of VA or DoD. It cannot promise how VA will treat your payment. If your withholding looks wrong, ask VA or an accredited VSO.