---
kind: "range"
citation: "38 C.F.R. §§ 3.271–3.273"
title: "38"
from: "3.271"
to: "3.273"
count: 3
url: "https://uscodex.org/cfr/38/3.271..3.273"
---

# §3.271. Computation of income.

- (a) **General.** Payments of any kind from any source shall be counted as income during the 12-month annualization period in which received unless specifically excluded under [§ 3.272](/cfr/38/3.272.md).
  - (1) **Recurring income.** Recurring income means income which is received or anticipated in equal amounts and at regular intervals (e.g., weekly, monthly, quarterly, etc.), and which will continue throughout an entire 12-month annualization period. The amount of recurring income for pension purposes will be the amount received or anticipated during a 12-month annualization period. Recurring income which terminates prior to being counted for at least one full 12-month annualization period will be treated as nonrecurring income for computation purposes.
  - (2) **Irregular income.** Irregular income means income which is received or anticipated during a 12-month annualization period, but which is received in unequal amounts or at irregular intervals. The amount of irregular income for pension purposes will be the amount received or anticipated during a 12-month annualization period following initial receipt of such income.
  - (3) **Nonrecurring income.** Nonrecurring income means income received or anticipated on a one-time basis during a 12-month annualization period (e.g., an inheritance). Pension computations of income will include nonrecurring income for a full 12-month annualization period following receipt of the income.
- (b) **Salary.** Salary means the gross amount of a person's earnings or wages before any deductions are made for such things as taxes, insurance, retirement plans, social security, etc.
- (c) **Business, farm or professional income.**
  - (1) This includes gross income from a business, farm or profession as reduced by the necessary operating expenses such as cost of goods sold, or expenditures for rent, taxes, and upkeep, or costs of repairs or replacements. The value of an increase in stock inventory of a business is not considered income.
  - (2) **Depreciation is not a deductible expense.**
  - (3) A loss sustained in operating a business, profession, farm, or from investments, may not be deducted from income derived from any other source.
- (d) **Income from property.** Income from real or personal property is countable as income of the property's owner. The terms of a recorded deed or other evidence of title shall constitute evidence of ownership. This includes property acquired through purchase, gift, devise, or descent. If property is owned jointly, income of the various owners shall be determined in proportion to shares of ownership of the property. The owner's shares of income held in partnership shall be determined on the basis of the facts found.
- (e) **Installments.** Income shall be determined by the total amount received or anticipated during a 12-month annualization period.
- (f) **Deferred determinations.**
  - (1) When an individual is unable to predict with certainty the amount of countable annual income, the annual rate of improved pension shall be reduced by the greatest amount of anticipated countable income until the end of the 12-month annualization period, when total income received during that period will be determined and adjustments in pension payable made accordingly.
  - (2) When a claimed dependent is shown to have income which exceeds the additional amount of benefits payable based on the claimed dependency, but evidence requirements of [§ 3.204](/cfr/38/3.204.md), [§ 3.205](/cfr/38/3.205.md), [§ 3.209](/cfr/38/3.209.md), or [§ 3.210](/cfr/38/3.210.md) have not been met, the maximum annual rate of improved pension shall be determined without consideration of the claimed dependency. This amount shall be reduced by an amount which includes the income of the unestablished dependent. Adjustments in computation of the maximum annual rate of improved pension shall occur following receipt of evidence necessary to establish the dependency.
- (g) **Compensation (civilian) for injury or death.** Compensation paid by the United States Department of Labor, Office of Workers' Compensation Programs, Social Security Administration, or the Railroad Retirement Board, or pursuant to any worker's compensation or employer's liability statute, or damages collected because of personal injury or death, will be considered income as received. However, medical, legal or other expenses incident to the injury or death, or incident to the collection or recovery of the amount of the award or settlement, may be deducted. The criteria in [§ 3.272(g)](/cfr/38/3.272.md?p=g) apply as to all medical expenditures after the award or settlement.
- (h) **Fractions of dollars.** Fractions of dollars will be disregarded in computing annual income.
- (i) **Waiver of receipt of income.** Potential income that is not excludable under [§ 3.272](/cfr/38/3.272.md) or [§ 3.279](/cfr/38/3.279.md) but is waived by an individual is included as countable income of the individual. However, if an individual withdraws a claim for Social Security benefits, after a finding of entitlement to those benefits, in order to maintain eligibility for unreduced Social Security benefits upon reaching a particular age, VA will not regard this potential income as having been waived and will therefore not count it.

# §3.272. Exclusions from income.


The following shall be excluded from countable income for the purpose of determining entitlement to improved pension. Unless otherwise provided, expenses deductible under this section are deductible only during the 12-month annualization period in which they were paid.

- (a) **Welfare.** Donations from public or private relief, welfare, or charitable organizations.
- (b) **Maintenance.** The value of maintenance furnished by a relative, friend, or a charitable organization (civic or governmental) will not be considered income. Where the individual is maintained in a rest home or other community institution or facility, public or private, because of impaired health or advanced age, money paid to the home or the individual to cover the cost of maintenance will not be considered income, regardless of whether it is furnished by a relative, friend, or charitable organization. The expense of maintenance is not deductible if it is paid from the individual's income.
- (c) **Department of Veterans Affairs pension benefits.** Payments under chapter 15 of title 38, United States Code, including accrued pension benefits payable under [38 U.S.C. 5121](/usc/38/5121.md).
- (d) **Reimbursement for casualty loss.** Reimbursement of any kind for any casualty loss. The amount to be excluded is not to exceed the greater of the fair market value or the reasonable replacement cost of the property involved at the time immediately preceding the loss. For purposes of this paragraph, the term “casualty loss” means the complete or partial destruction of property resulting from an identifiable event of a sudden, unexpected or unusual nature.
- (e) **Profit from sale of property.** Profit realized from the disposition of real or personal property other than in the course of business, except amounts received in excess of the sales price, for example, interest on deferred sales is included as income. In installment sales, any payments received until the sales price is recovered are not included as income, but any amounts received which exceed the sales price are included, regardless of whether they represent principal or interest.
- (f) **Joint accounts.** Amounts in joint accounts in banks and similar institutions acquired by reason of death of the other joint owner.
- (g) **Medical expenses.** Within the provisions of the following paragraphs, there will be excluded from the amount of an individual's annual income any unreimbursed amounts which have been paid within the 12-month annualization period for medical expenses regardless of when the indebtedness was incurred. An estimate based on a clear and reasonable expectation that unusual medical expenditure will be realized may be accepted for the purpose of authorizing prospective payments of benefits subject to necessary adjustment in the award upon receipt of an amended estimate, or after the end of the 12-month annualization period upon receipt of an eligibility verification report. For the definition of what constitutes a medical expense, see [§ 3.278](/cfr/38/3.278.md), Deductible medical expenses.
  - (1) **Veteran's income.** Unreimbursed medical expenses will be excluded when all of the following requirements are met:
    - (i) They were or will be paid by a veteran or spouse for medical expenses of the veteran, spouse, children, parents and other relatives for whom there is a moral or legal obligation of support;
    - (ii) They were or will be incurred on behalf of a person who is a member or a constructive member of the veteran's or spouse's household; and
    - (iii) They were or will be in excess of 5 percent of the applicable maximum annual pension rate or rates for the veteran (including increased pension for family members but excluding increased pension because of need for aid and attendance or being housebound) as in effect during the 12-month annualization period in which the medical expenses were paid.
  - (2) **Surviving spouse's income.** Unreimbursed medical expenses will be excluded when all of the following requirements are met:
    - (i) They were or will be paid by a surviving spouse for medical expenses of the spouse, veteran's children, parents and other relatives for whom there is a moral or legal obligation of support;
    - (ii) They were or will be incurred on behalf of a person who is a member or a constructive member of the spouse's household; and
    - (iii) They were or will be in excess of 5 percent of the applicable maximum annual pension rate or rates for the spouse (including increased pension for family members but excluding increased pension because of need for aid and attendance or being housebound) as in effect during the 12-month annualization period in which the medical expenses were paid.
  - (3) **Children's income.** Unreimbursed amounts paid by a child for medical expenses of self, parent, brothers and sisters, to the extent that such amounts exceed 5 percent of the maximum annual pension rate or rates payable to the child during the 12-month annualization period in which the medical expenses were paid.
- (h) **Expenses of last illnesses, burials, and just debts.** Expenses specified in paragraphs [(h)(1)](#h-1) and [(h)(2)](#h-2) of this section which are paid during the calendar year following that in which death occurred may be deducted from annual income for the 12-month annualization period in which they were paid or from annual income for any 12-month annualization period which begins during the calendar year of death, whichever is to the claimant's advantage. Otherwise, such expenses are deductible only for the 12-month annualization period in which they were paid.
  - (1) **Veteran's final expenses.**
    - (i) Amounts paid by a spouse before a veteran's death for expenses of the veteran's last illness will be deducted from the income of the surviving spouse.
    - (ii) Amounts paid by a surviving spouse or child of a veteran for the veteran's just debts, expenses of last illness and burial (to the extent such burial expenses are not reimbursed under chapter 23 of title 38 U.S.C.) will be deducted from the income of the surviving spouse or child. The term “just debts” does not include any debt that is secured by real or personal property.
  - (2) **Spouse or child's final expenses.**
    - (i) Amounts paid by a veteran for the expenses of the last illness and burial of the veteran's deceased spouse or child will be deducted from the veteran's income.
    - (ii) Amounts paid by a veteran's spouse or surviving spouse for expenses of the last illness and burial of the veteran's child will be deducted from the spouse's or surviving spouse's income.
- (i) **Educational expenses.** Amounts equal to expenses paid by a veteran or surviving spouse pursuing a course of education or vocational rehabilitation or training, to include amounts paid for tuition, fees, books, and materials, and in the case of a veteran or surviving spouse in need of regular aid and attendance, unreimbursed amounts paid for unusual transportation expenses in connection with the pursuit of such course. Unusual transportation expenses are those exceeding the reasonable expenses which would have been incurred by a nondisabled person using an appropriate means of transportation (public transportation, if reasonably available).
- (j) **Child's income.** In the case of a child, any current work income received during the year, to the extent that the total amount of such income does not exceed an amount equal to the sum of the following:
  - (1) The lowest amount of gross income for which a Federal income tax return must be filed, as specified in section 6012(a) of the Internal Revenue Code of 1954, by an individual who is not married (as determined under [section 143](/cfr/38/143.md) of such Code), and is not a surviving spouse (as defined in [section 2(a)](/cfr/38/2.md?p=a) of such Code), and is not a head of household (as defined in [section 2(b)](/cfr/38/2.md?p=b) of such Code); and
  - (2) If the child is pursuing a course of postsecondary education or vocational rehabilitation or training, the amount paid by the child for those educational expenses including the amount paid for tuition, fees, books, and materials.
- (k) **Veterans' benefits from States and municipalities.** VA will exclude from income payments from a State or municipality to a veteran of a monetary benefit that is paid as a veterans' benefit due to injury or disease. VA will exclude up to $5,000 of such benefit in any annualization period.
- (l) **Distributions of funds under 38 U.S.C. 1718.** Distributions from the Department of Veterans Affairs Special Therapeutic and Rehabilitation Activities Fund as a result of participation in a therapeutic or rehabilitation activity under [38 U.S.C. 1718](/usc/38/1718.md) and payments from participation in a program of rehabilitative services provided as part of the care furnished by a State home and which is approved by VA as conforming to standards for activities under [38 U.S.C. 1718](/usc/38/1718.md) shall be considered donations from a public or private relief or welfare organization and shall not be countable as income for pension purposes.
- (m) **Hardship exclusion of child's available income.** When hardship is established under the provisions of [§ 3.23(d)(6)](/cfr/38/3.23.md?p=d-6) of this part, there shall be excluded from the available income of any child or children an amount equal to the amount by which annual expenses necessary for reasonable family maintenance exceed the sum of countable annual income plus VA pension entitlement computed without consideration of this exclusion. The amount of this exclusion shall not exceed the available income of any child or children, and annual expenses necessary for reasonable family maintenance shall not include any expenses which were considered in determining the available income of the child or children or the countable annual income of the veteran or surviving spouse.
- (n) **Survivor benefit annuity.** Annuity paid by the Department of Defense under the authority of [section 653](/cfr/38/653.md), Public Law 100-456 to qualified surviving spouses of veterans who died prior to November 1, 1953. (September 29, 1988)
- (o) **Cash surrender value of life insurance.** That portion of proceeds from the cash surrender of a life insurance policy which represents a return of insurance premiums.
- (p) **Radiation Exposure Compensation Act.** Any payment made under Section 6 of the Radiation Exposure Compensation Act of 1990.
- (q) **Life insurance proceeds.** Lump-sum proceeds of any life insurance policy on a veteran.
- (r) **Income tax returns.** VA will exclude from income payments from income tax returns. See [§ 3.279(e)(1)](/cfr/38/3.279.md?p=e-1).
- (s) **Reimbursements for loss.** VA will exclude from income payments described in [38 U.S.C. 1503(a)(5)](/usc/38/1503.md?p=a-5).
- (t) **Statutory exclusions.** Other amounts excluded from income by statute. See [§ 3.279](/cfr/38/3.279.md). VA will exclude from income any amount designated by statute as not countable as income, regardless of whether or not it is listed in this section or in [§ 3.279](/cfr/38/3.279.md).

# §3.273. Rate computation.


The commencement date of change in benefit payments based on rate computations under the provisions of this section will be determined under the provisions of [§ 3.31](/cfr/38/3.31.md) or [§ 3.660](/cfr/38/3.660.md).

- (a) **Initial award.** For the purpose of determining initial entitlement, or for resuming payments on an award which was previously discontinued, the monthly rate of pension payable to a beneficiary shall be computed by reducing the beneficiary's applicable maximum pension rate by the beneficiary's countable income on the effective date of entitlement and dividing the remainder by 12. Effective June 1, 1983, the provisions of [§ 3.29(b)](/cfr/38/3.29.md?p=b) apply to this paragraph. Recomputation of rates due to changes in the maximum annual pension rate or rate of income following the initial date of entitlement are subject to the provisions of [paragraph (b)](#b) of this section.
- (b) **Running awards—**
  - (1) **Change in maximum annual pension rate.** Whenever there is change in a beneficiary's applicable maximum annual pension rate, the monthly rate of pension payable shall be computed by reducing the new applicable maximum annual pension rate by the beneficiary's countable income on the effective date of the change in the applicable maximum annual pension rate, and dividing the remainder by 12. Effective June 1, 1983, the provisions of [§ 3.29(b)](/cfr/38/3.29.md?p=b) apply to this paragraph.
  - (2) **Change in amount of income.** Whenever there is a change in a beneficiary's amount of countable income the monthly rate of pension payable shall be computed by reducing the beneficiary's applicable maximum annual pension rate by the beneficiary's new amount of countable income on the effective date of the change in the amount of income, and dividing the remainder by 12. Effective June 1, 1983, the provisions of [§ 3.29(b)](/cfr/38/3.29.md?p=b) apply to this paragraph.
- (c) **Nonrecurring income.** The amount of any nonrecurring countable income (e.g. an inheritance) received by a beneficiary shall be added to the beneficiary's annual rate of income for a 12-month annualization period commencing on the effective date on which the nonrecurring income is countable.
- (d) **Recurring and irregular income.** The amount of recurring and irregular income anticipated or received by a beneficiary shall be added to determine the beneficiary's annual rate of income for a 12-month annualization period commencing at the beginning of the 12-month annualization, subject to the provisions of [§ 3.660(a)(2)](/cfr/38/3.660.md?p=a-2) of this chapter.