By now you have probably realized that many of our clients are former members of the US Military. As such most of them receive VA benefits. Their tax treatment has already been discussed in a previous article. However, an often over-looked tax aspect about VA benefits, is the VA rating that goes hand in hand with those cash benefits.
Your VA disability rating matters because under German tax law certain disability ratings come with additional deductions under German tax law – some are standard, some are itemized. While it won’t make or break your return, we take the position that you should try to get as much benefit as possible from your service-related disability!
So, we always try to get your VA disability rating accepted on the German tax side and we have had great success there. It is important to notice that there is no legal precedence out there about foreign disability ratings. Also, German tax offices are used to dealing with German disability cards, so a VA rating is nothing they see often. However, what needs to happen is that you include your VA rating in the tax return in the same way you would with a German rating. Usually, a German tax office will then ask for documentation thereof.
At this point it is not enough to just provide the frontpage of your VA letter – again, it is a foreign rating and it does not come by way of the standard German disability card. However, there are several court rulings (also at the Supreme Court level) which say that a German disability card is not necessary to document a disability. According to the courts it suffices to have documentation by an accepted medical services provider of certain conditions which impair you to an effect that it is “disabling”. So, any response letter to the German tax office needs to highlight that. Ideally your VA letter lists your conditions and the partial ratings, as well as the accumulated total rating. Along with your DD214 in many cases this makes for a compelling case where we managed to obtain additional tax breaks for our US clients.
