How do CRDP and CRSC differ in eligibility, computation, and tax/treatment by DFAS?
Executive summary
Concurrent Retirement and Disability Pay (CRDP and Combat-Related Special Compensation (CRSC) are two distinct remedies to the VA “waiver” that reduces military retired pay when a retiree receives VA disability compensation, and they differ sharply in who is eligible, how the amounts are computed, and how DFAS treats them for tax and pay-processing purposes [1] [2]. CRDP is an automatic restoration of retired pay for retirees meeting statutory disability thresholds and is taxable income paid through DFAS, while CRSC is an application‑based, combat‑linked reimbursement that is non‑taxable and may be paid separately by the service with coordination by DFAS [3] [4] [5].
1. Eligibility — automatic restoration versus application and the combat link
CRDP eligibility is statutory and automatic for retirees who meet defined VA disability thresholds (for example, a 50% or greater VA rating under current CRDP phases and additional groups added over time), so DFAS will generally restore retired pay without a separate application when the retiree meets those criteria [6] [2]. By contrast, CRSC requires an application to the service’s CRSC office and a showing that the disabling condition is combat‑related, caused by hazardous duty, training, or an instrumentality of war — a stricter standard that the service must verify before award [4] [7]. Importantly, a retiree can qualify for one program, the other, or both, but may not receive both simultaneously and must elect which to receive when eligible for both; DFAS or the services will coordinate to ensure the retiree receives the higher net benefit or allow an annual election during “open season” [1] [7] [8].
2. Computation — what each program actually pays and why amounts differ
CRDP functions by restoring the portion of retired pay that was withheld because the retiree elected VA compensation — effectively putting the years‑of‑service portion of retired pay back in the DFAS check, which increases the monthly retired pay rather than issuing a separate combat reimbursement [3] [2]. CRSC, in contrast, reimburses the portion of the VA waiver attributable to combat‑related disabilities as determined by the service; its amount depends on the service’s disability determination and can vary or be recomputed if CRSC‑qualified disabilities change, so the CRSC payment is not a simple mirror of the VA rating and may fluctuate [1] [4]. Practical consequences follow: a retiree with a large overall VA rating might still receive less CRSC if only part of the rating is combat‑related, which can make a taxable CRDP larger in dollar terms even though CRSC is tax‑favored [7] [5].
3. Tax and DFAS treatment — taxable pay vs. tax‑free reimbursement, forms, and checks
DFAS treats CRDP as an increase to taxable retired pay; it is reflected in the DFAS/Retired Pay account and reported as taxable retirement income (for example via IRS reporting forms issued by DFAS), because CRDP restores retired pay that would otherwise have been subject to tax [3] [5]. CRSC is explicitly non‑taxable under federal law and is paid as a separate reimbursement for combat‑related disabilities; payment mechanics involve the branch of service issuing CRSC funds (sometimes coordinated with DFAS), and CRSC is not taxable like VA compensation [1] [4] [5]. DFAS provides guidance and customer service for questions about either payment, and retains a role in coordinating payments and adjustments, including automatic selection of the greater amount when a retiree becomes eligible for both programs [2] [1] [3].
4. Practical tradeoffs and procedural realities — why retirees must check both paths
The choice between CRDP and CRSC can be counterintuitive: tax‑free CRSC is not always financially superior because the combat‑related portion of a VA rating may be smaller than the overall rating used to trigger CRDP, so retirees should review DFAS statements, consider applying for CRSC if combat linkage exists, and use the annual election process or DFAS’s automatic comparison to secure the larger payment [7] [8] [3]. Sources differ in emphasis — DFAS centers on process and coordination [9] [2], advocacy groups underscore the tax advantage of CRSC but warn about narrower eligibility [7] [4], and congressional analyses place the programs in a broader policy and budget context [6]. Reporting here is limited to the cited official and secondary sources; specific computational examples or individual tax consequences should be verified with DFAS, the retiree’s service CRSC office, or a tax advisor.