What specific income-limit changes is the VA proposing for 2026 benefits?
Executive summary
The principal proposed change is a means test on VA disability compensation that would start in January 2026: veterans with total household income below an inflation‑adjusted threshold (about $135,000 for 2026) — excluding VA disability payments — would keep full benefits; households above that threshold would see benefits phased out at $1 lost per $2 earned (CBO analysis) [1]. The proposal is part of broader budget options discussed by the Congressional Budget Office and appears distinct from existing VA health‑care income limits and pension rules [1] [2] [3].
1. What the CBO says the 2026 means test would do
The Congressional Budget Office (CBO) describes an option to “means‑test” all current and prospective recipients of VA disability compensation beginning January 2026. Under that option, full payments would be limited to veterans whose total household income — excluding VA disability payments — is below an inflation‑adjusted threshold set for 2026 at about $135,000; above that threshold compensation would be phased down so that for every $2 in additional gross household income, disability compensation would fall by $1 [1].
2. How that $135,000 figure was derived and who it would affect
CBO ties the $135,000 threshold to the 70th percentile of U.S. household income in 2022, adjusted for inflation to the 2026 dollar value. The CBO estimated that nearly 30% of veterans receiving disability payments in 2026 would have household incomes above that threshold under its projection — meaning a substantial minority of current recipients would face reduced payments under this option [1].
3. How the phase‑out would work in practice
The phase‑out described by CBO is a linear taper: once a household’s gross income (excluding VA disability) exceeds the threshold, benefits would be reduced at a constant rate — losing one dollar of VA compensation for every two dollars in extra household income. The threshold would then be indexed after 2026 to CPI for urban wage earners and clerical workers [1].
4. Where this proposal sits relative to today’s rules
Today, standard VA disability compensation does not have income limits; eligibility is based on service‑connection and disability rating rather than household income. Income limits currently apply to different VA programs — for example, VA health care uses income thresholds to assign priority groups and eligibility (a national threshold for a single household was about $40,000 in 2024 for some priority determinations) — and VA pension and Aid & Attendance are means‑tested under different rules [4] [5] [3] [2]. The CBO proposal would be a structural change for the main disability compensation program [1] [6].
5. Why CBO proposed it — budget context and projected savings
CBO framed this means‑test as one option to reduce mandatory spending growth for VA disability compensation as part of broader budget‑option documents. Applying a household income threshold and taper would reduce outlays on disability compensation relative to current law; CBO included the measure in analyses of options to reduce other mandatory spending [6] [1].
6. What’s not addressed in the available reporting
Available sources do not mention how the VA or Congress has formally advanced this specific $135,000 means‑test proposal as binding policy, what administrative mechanisms VA would use to verify household income year‑to‑year, how dependents or spousal income would be counted in every case, or what transitional safeguards (if any) would protect currently‑high‑need veterans (not found in current reporting) [1] [2] [3].
7. Competing viewpoints and likely controversies
The proposal pits fiscal restraint against advocates who argue disability compensation should be based solely on service‑connection and impairment, not household resources. CBO frames the change as a budget option to limit spending; other stakeholders (not quoted in the CBO summaries provided) would likely call any means test an erosion of an earned benefit. The sources here show CBO’s technical design and estimated coverage (about 30% above threshold) but do not include VA leadership statements or veterans‑group responses [1] [6].
8. Practical next steps for veterans and policymakers
Policymakers would need to legislate any change; CBO’s documents are options and analyses, not law. Veterans should monitor congressional action and VA rulemaking and consult official VA resources on current income limits for health care and pension programs [2] [3]. The VA’s FY2026 budget submission addresses many proposals but the CBO option is separate analytical material [7] [1].
Limitations: this analysis relies on CBO budget‑option summaries and VA public pages in the provided documents; the sources do not document VA or congressional enactment of the specific $135,000 means test or operational details such as income verification procedures [1] [2].