How to calculate after‑tax take‑home for CRDP vs CRSC given a specific federal tax bracket and state taxes
Executive summary
Calculating after‑tax take‑home for CRDP versus CRSC requires first identifying which program applies, confirming the gross monthly amounts DFAS reports for retired pay and the CRSC reimbursement, then applying federal and state tax treatments: CRDP is treated as taxable retired pay while CRSC is generally tax‑free, and state tax rules and other deductions can materially change the net outcome [1] [2] [3] [4].
1. Understand the tax character of each payment
CRDP restores retired pay that is normally taxable, so concurrent receipt under CRDP is treated as taxable income for federal withholding in the same manner as retirement pay [1] [2]; by contrast, CRSC is a reimbursement of a VA waiver and is generally paid as tax‑free compensation, not considered taxable retired pay [2] [3].
2. Identify the DFAS gross figures to use in the calculation
Use the DFAS retirement account statement (RAS) or CRSC/CRDP notices to obtain the gross monthly CRDP amount (the restored retired pay) and the gross CRSC reimbursement amount, because DFAS will award the greater of CRDP or CRSC and will show the numbers you must compare when choosing programs during open season [5] [2] [3].
3. Build the taxable‑income baseline for CRDP
For a CRDP scenario, add the restored retired pay (CRDP amount) to other taxable retirement income to determine the incremental taxable income subject to the specified federal marginal tax rate; federal withholding follows the same rules that apply to retired pay [1] [2]. To estimate take‑home, multiply the incremental CRDP amount by (1 − federal marginal rate) and then subtract applicable state income tax on that incremental amount according to the state’s rules [4].
4. Build the take‑home baseline for CRSC
For a CRSC scenario, treat the CRSC payment as generally tax‑exempt federally, so it does not increase federal taxable income, and therefore is not reduced by federal income tax withholding [2] [3]. Because certain deductions that apply to retired pay (for example, some offsets or survivor plan costs) are not deducted from CRSC payments, the gross CRSC amount is usually what the veteran receives absent other non‑tax deductions [5].
5. Compare after‑tax outcomes with a concrete method
To compare: (A) CRDP after‑tax = CRDP_gross × (1 − federal_rate) − state_tax_on_CRDP, where state_tax_on_CRDP = CRDP_gross × state_rate (adjust for state rules); (B) CRSC after‑tax = CRSC_gross − state_tax_on_CRSC (many states follow federal treatment but some do not, so state tax may apply) [1] [2] [4]. Use DFAS gross amounts and the taxpayer’s marginal federal bracket and state rate to compute both results and pick the larger net figure; organizations such as MOAA note that a larger taxable CRDP can still exceed a smaller tax‑free CRSC once taxes are applied [6].
6. Watch for timing, retroactivity and administrative details that change math
When CRSC is awarded retroactively or when VA ratings change mid‑year, DFAS adjustments and potential tax refunds can alter prior years’ tax liabilities, and DFAS opens an annual election window for switching programs—these administrative realities can affect both the current year and prior‑year tax positions [2] [5]. Additionally, because some states treat military compensation differently, “tax‑free” CRSC at the federal level might be taxable under certain state rules, so consultation or a paycheck calculator that includes state rules is recommended [5] [4].
7. Practical checklist before choosing
Confirm DFAS gross figures for CRDP and CRSC [5]; apply the taxpayer’s federal marginal rate to the incremental CRDP gross and subtract state tax using the state’s rulebook or a calculator [4] [1]; compute net CRSC treating it as tax‑exempt federally but check state taxation [2] [3]; compare net monthly and annual totals — remember MOAA’s advice that higher taxable CRDP can outpace lower tax‑free CRSC depending on ratings and amounts [6].