Yes and no. Medal of Honor recipients pay federal income tax on most income, including wages, investment earnings, and military retirement pay based on years of service. The one major exception is the Medal of Honor special pension itself, which is fully exempt from federal income tax under 38 U.S.C. 1562 and shielded from creditor claims by federal law. As of 2026, that pension pays approximately $5,780 per month, or roughly $69,360 per year, to each of the about 60 living recipients tracked by the Congressional Medal of Honor Society.
This guide explains how the tax rules actually work in 2026, which income is taxable and which is not, and what the MEDAL Act of 2025 changed.
Key Takeaways
- Federal income tax still applies: Medal of Honor recipients pay federal income tax on wages, investments, and length-of-service military retirement pay like any other citizen.
- Special pension is tax-free: The Medal of Honor special pension is fully exempt from federal income tax under 38 U.S.C. 1562 and IRS Publication 525.
- MEDAL Act raised the pension: Public Law 119-43, signed December 1, 2025, raised the monthly pension from about $1,400 to about $5,625, with annual cost-of-living increases.
- 2026 monthly amount: Living recipients receive approximately $5,780 per month in 2026 after the December 2025 cost-of-living adjustment.
- Protected from creditors: Federal law shields most VA-administered payments, including the MOH pension, from attachment, levy, and seizure under 38 U.S.C. 5301.
- VA disability and SSDI stack on top: Recipients can receive the pension, VA disability compensation, SSDI, and Social Security at the same time without offset under current federal law.
- State benefits vary widely: Several states grant MOH recipients property tax relief, free vehicle registration, parking exemptions, and sales tax breaks.
Is the Medal of Honor pension taxable in 2026?
No. The Medal of Honor special pension is fully exempt from federal income tax. The exemption flows from two layers of federal law: 38 U.S.C. 1562, which creates the pension and sets the formula, and the general rule that VA-administered pension and disability payments are not counted as gross income for federal tax purposes.
The Internal Revenue Service confirms the same treatment in Publication 525, Taxable and Nontaxable Income, which lists Department of Veterans Affairs disability and pension payments as excluded from gross income. The IRS also publishes a Veterans tax information and services page that lists examples: disability compensation, pension payments, grants for accessible vehicles or homes, and dependent-care assistance. The MOH pension is paid by the VA under Title 38, so it falls inside that exclusion. Recipients do not enter the payment anywhere on Form 1040.
On top of the tax exemption, federal law shields most VA-administered payments from creditor claims under 38 U.S.C. 5301. That section prevents attachment, levy, seizure, or assignment of the benefits in most situations. The MOH pension carries one of the strongest legal protections Congress has placed on any veteran benefit, and the recipient keeps the full amount even when other income is reduced by tax withholding, garnishment, or court orders.
How the MEDAL Act of 2025 changed the special pension
The Medal of Honor Act, signed by the President on December 1, 2025, as Public Law 119-43, raised the Medal of Honor special pension from about $1,400 per month to roughly $5,625 per month. After the December 2025 cost-of-living adjustment, the 2026 base rate sits at approximately $5,780 per month, or about $69,360 per year.
The MEDAL Act was the largest single increase to the special pension since Congress first created the benefit in 1916. Before the Act, recipients had been receiving about $1,400 per month, a figure built on a 2002 base rate of $1,000 plus 23 years of annual cost-of-living adjustments. The new law replaced the static base with a formula that ties the pension to the compensation rate paid to severely disabled veterans without dependents under 38 U.S.C. 1114, increased to the next intermediate rate.
The legislative history is publicly searchable through Congress.gov. The House passed H.R. 695 by a vote of 424 to 0 in February 2025. The Senate approved the bill by unanimous consent in November 2025. The President signed it on December 1, 2025. The bill was bipartisan and uncontroversial: every member of the House who voted voted yes.
The MEDAL Act did not change the tax treatment of the pension. The exemption from federal income tax under 38 U.S.C. 1562 carried over unchanged. Recipients receive the new, higher amount without owing any federal income tax on it, and without it counting toward gross income for purposes of other federal tax calculations, such as Social Security taxability thresholds.
Taxable Versus Tax-Free Income For Medal Of Honor Recipients
The table below summarizes how the most common income sources for a Medal of Honor recipient are treated for federal income tax purposes in 2026. State treatment can vary and is addressed in the next section.
| Income Source | Federal Tax Treatment | Primary Authority |
|---|---|---|
| Medal of Honor special pension | Tax-free | 38 U.S.C. 1562; IRS Pub. 525 |
| VA disability compensation | Tax-free | IRS Pub. 525 |
| VA Dependency and Indemnity Compensation (DIC) | Tax-free | IRS Pub. 525 |
| GI Bill and other VA education benefits | Tax-free | IRS Pub. 970 |
| Combat-Related Special Compensation (CRSC) | Tax-free | IRS Pub. 525 |
| Combat zone pay | Tax-free (up to statutory limits) | IRS Pub. 3 |
| Military retirement pay (length of service) | Taxable | IRS Pub. 525 |
| Wages from civilian employment | Taxable | Standard W-2 income |
| Speaking fees, book royalties, endorsements | Taxable | Self-employment / 1099 income |
| Investment income (interest, dividends, gains) | Taxable | Standard rules |
| Social Security retirement benefits | Partially taxable above thresholds | SSA rules |
| SSDI benefits | Partially taxable above thresholds | SSA rules |
The federal exemption for VA-administered payments is the rule. Everything else follows the ordinary tax code. A Medal of Honor recipient who earns a salary from a defense contractor, sells a book on their life story, or holds a portfolio of dividend-paying stocks owes federal income tax on those amounts the same as any other taxpayer. The Medal does not transform unrelated income into tax-free income.
How To Keep Your Medal Of Honor Pension Fully Untaxed: 5 Steps
These steps confirm the federal tax exemption, document the income separately, and pick up the state-level benefits that often run alongside the federal pension.
- Confirm your enrollment on the Medal of Honor Roll. The pension begins on the date your name is entered on the Army, Navy, Air Force, or Coast Guard Medal of Honor Roll, but only after you file a written application with the Secretary of the branch in which you served. Each branch maintains its own Roll, and the VA pays the pension on receipt of the enrollment certificate.
- Do not enter the pension on Form 1040. The VA does not issue a Form 1099 for the MOH pension. The amount does not enter your gross income, your adjusted gross income, or your taxable income. If you work with a tax preparer, confirm in writing that the preparer is treating the payment as a non-reportable VA pension.
- Keep the income separate in your records. Maintain a clean paper trail showing which deposits represent the MOH pension and which represent other income, such as wages, investments, or military retirement pay. Clear documentation helps if you ever face an IRS examination and matters for state tax filings in states that ask about VA payments.
- Apply for the state-level benefits in your state of residence. Several states grant additional benefits to MOH recipients. Georgia exempts MOH recipients from the title ad valorem tax on vehicles, as detailed by the Georgia Department of Veterans Service. California grants free vehicle registration and license plates. New York provides fee-exempt registration and free travel on the New York State Thruway. South Carolina exempts MOH-tagged vehicles from municipal parking meter fees. The benefits vary, but the application process is usually short.
- Use your DD Form 214 and Medal citation to claim local benefits. Most state and local benefits require proof of Medal of Honor status. Keep certified copies of your DD Form 214 and your Medal of Honor citation accessible. If you have lost your DD-214, you can request a replacement through the National Personnel Records Center.
Key Tax Terms Medal Of Honor Recipients Should Know
38 U.S.C. 1562: The federal statute that creates the Medal of Honor special pension ties the rate to a formula under 38 U.S.C. 1114 and authorizes annual cost-of-living adjustments. The statute also governs how surviving spouses qualify.
IRS Publication 525: The IRS guide on Taxable and Nontaxable Income. It is the primary federal source confirming that VA-administered disability and pension benefits are excluded from gross income.
MEDAL Act (Public Law 119-43): The Monetary Enhancement for Distinguished Active Legends Act of 2025, which raised the special pension from $1,400 to roughly $5,625 per month and tied future rates to a formula based on Special Monthly Compensation.
Medal of Honor Roll: The official list maintained by each branch of service. Enrollment is required before the VA can pay the pension.
Concurrent receipt: Receiving more than one federal payment at the same time, such as VA disability compensation alongside SSDI or a military retirement check. The MOH pension is a concurrent-receipt payment by design and does not offset other VA, SSA, or Department of Defense benefits.
CRDP and CRSC: Concurrent Retirement and Disability Pay and Combat-Related Special Compensation. Both let qualifying veterans receive their full military retirement pay alongside VA disability compensation. CRSC payments are themselves tax-free; CRDP retirement pay remains taxable.
VA Pension (needs-based): A separate, income-tested VA benefit for wartime veterans with limited income and assets. Not the same as the Medal of Honor special pension, which is status-based and paid regardless of income or net worth.
What Congressional sources say about Medal of Honor pension taxation
The 2025 legislative history makes the federal tax position explicit. Sponsoring members described the pension increase as recognition of the ongoing public duties Medal of Honor recipients carry, including travel for ceremonies, recruiting events, and educational appearances. The bill text amending Section 1562 reaffirmed the tax exemption at the same time as it raised the dollar amount.
The Congressional Medal of Honor Society, the federally chartered organization for living recipients, confirms in its public FAQ that the special monthly pension is one of several recognized benefits, alongside Space Available military air travel, base commissary access, burial at Arlington National Cemetery, and admission to the U.S. military service academies for qualifying children without nomination or quota requirements. The Society reports that approximately 60 living recipients were enrolled on the various branch rolls as of January 2026.
Master Sergeant Earl Plumlee, a living Medal of Honor recipient, interviewed by Military.com after the MEDAL Act was signed, said the new law balances the scales between recipients' service and their post-service public duties. The reporting reflects what Members of Congress emphasized during debate: the pension is not pay for past service but financial support for ongoing service to the country, all of it federally tax-free.
Where this leaves Medal of Honor recipients in 2026
The short answer holds. Medal of Honor recipients pay federal income tax on most income, but the special pension itself is fully tax-free, protected from most creditor claims, and stackable with VA disability compensation, SSDI, military retirement pay, and Social Security. The MEDAL Act of 2025 raised the dollar amount sharply without changing the tax treatment. State and local benefits vary by jurisdiction and are usually worth claiming.
As of 2026, the approximately 60 living recipients hold one of the strongest federal income protections written into U.S. law. The exemption is in the statute, confirmed by the IRS, and shielded against most tax liens and creditor claims. The tax question most recipients face is not the pension itself but the rest of their income: salary, investments, length-of-service retirement pay, and speaking or endorsement income. Those follow the ordinary tax code on the same terms that apply to any other taxpayer.
If you are a Medal of Honor recipient, a surviving spouse, or a family member helping a recipient organize their finances, the next steps are practical: confirm enrollment on the Medal of Honor Roll, document the pension separately in your records, apply for any state-level benefits available where you live, and consult a tax professional familiar with military and veteran benefits for the rest of your tax picture.
For more on how veteran status connects to disability benefits and the legal rights that go with them, see what qualifies a person as a veteran and how to know if you are a veteran.
Frequently Asked Questions
Are Medal of Honor recipients exempt from federal income tax?
No. Medal of Honor recipients pay federal income tax on wages, investments, business income, length-of-service military retirement pay, and other ordinary income. The special pension itself is the major exception. It is fully exempt under 38 U.S.C. 1562, and IRS Publication 525, but the rest of a recipient's tax picture follows the same rules as any other taxpayer.
How much is the Medal of Honor pension in 2026?
For 2026, the Medal of Honor special pension is approximately $5,780 per month, or roughly $69,360 per year. The MEDAL Act of 2025 set a new base near $5,625, and the December 2025 cost-of-living adjustment raised that figure for the calendar year. Future COLA increases occur every December 1.
Can Medal of Honor recipients receive VA disability and SSDI at the same time?
Yes. The Medal of Honor special pension, VA disability compensation, and SSDI are all separate federal programs with separate eligibility rules. None of them offset the others under current federal law. Recipients can receive all three concurrently and also receive Social Security retirement benefits if otherwise eligible.
Is the Medal of Honor pension subject to state income tax?
State tax treatment varies. Several states with no personal income tax exclude the pension automatically. Most states that tax income exempt VA benefits or military pension income, but the rules differ by state. Confirm the treatment with your state revenue department or a tax professional licensed in your state before filing.
Does the pension transfer to a surviving spouse?
Yes, with conditions. Under 38 U.S.C. 1562, the surviving spouse of a Medal of Honor recipient may receive the special pension if the marriage lasted at least one year before the recipient's death, or if the marriage produced a child. Remarriage before age 57 generally ends the entitlement; remarriage at age 57 or older does not.
Can a creditor or the IRS attach the Medal of Honor pension?
Federal law protects most VA-administered payments, including the Medal of Honor pension, from attachment, levy, and seizure under 38 U.S.C. 5301. Exceptions exist for limited categories such as certain child support obligations, but the pension is among the most heavily protected federal payments and cannot generally be reached by ordinary creditor processes.
What is the difference between the Medal of Honor pension and VA Pension?
They are two different programs with similar names. The Medal of Honor special pension under 38 U.S.C. 1562 is a flat, status-based benefit paid to MOH recipients regardless of income or assets. VA Pension under Chapter 15 of Title 38 is a needs-based program for wartime veterans with limited income and net worth. The two are not interchangeable, and a recipient does not have to choose between them.
The post Do Medal of Honor Recipients Pay Taxes? A 2026 Guide appeared first on Resources on Disability Assistance: Your Rights and Benefits.
source https://www.disabilityhelp.org/do-medal-of-honor-recipients-pay-taxes/
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