DoD Disability Severance Pay

Regular Air Force: Active Duty

Benefit Fact Sheet

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The Secretary of the Air Force may separate, versus retire, a service member who is found physically unfit to perform their duties due to a disability. Separation may occur with entitlement to disability severance pay or without entitlement to disability benefits. Separation with disability severance pay occurs when the service member's unfitting disabilities are determined by the Department of the Air Force to be service connected, the service member has less than 20 years of service as computed under 10 USC 1208, and the service member's combined disability rating assigned to the unfitting disabilities is less than 30%. Separation without entitlement to disability benefits occurs when the unfitting disabilities are determined to be non-service connected without permanent aggravation or incurred due to misconduct. Service members of the Ready Reserve with 20 qualifying years and service members of the Selected Reserve with 15 qualifying years with a disability disposition of separation with or without severance pay have an additional election in lieu of being separated. This additional election is discussed further in this paper.


To be entitled to disability severance pay, the service member's unfitting disability must meet the criteria below.

  • The disability is permanent or may be permanent. Unlike the criteria for permanent disability retirement or placement on the Temporary Disability Retirement List (TDRL), whether the disability is stable is not a consideration.
  • For airmen and guardians serving on active duty under an order to active duty of more than 30 days, the disability must be incurred while the service member was entitled to basic pay, or incurred while the service member was in an excess leave status due to an emergency reason, or incurred due to an authorized absence to participate in an educational program.
  • The disability is not the result of the member's intentional misconduct or willful neglect and was not incurred during a period of unauthorized absence.
Benefit Highlights

Eligibility for disability severance pay and pre-existing conditions

Veteran with prostetic leg exercising

The phrase, "pre-existing condition" generally refers to a medical condition that was incurred (originated) when the service was not in a duty status and was not permanently aggravated while the service member was in a duty status. Under the provisions of 10 USC 1207a pre-existing conditions are deemed in the line of duty when the service member is serving on active duty under an order to active duty of more than thirty days and will have a career total of eight years of active duty service at the time of separation for disability.

Formula for computing

Disability Severance Pay is a one-time, lump sum payment and is computed as follows:

  • 2 x basic pay for applicable grade x years of service (subject to minimum three or six years) not to exceed 19 years.

  • Applicable grade is the highest of the following:

    • Current grade

    • Highest grade satisfactorily served

    • Grade to which the service member would have been promoted had it not been for the disability for which he is being separated. This is colloquially referred to as, "promotion list grade"

  • Service members are credited with a minimum of three years of service as computed under 10 USC 1208 unless they qualify for the minimum six years of service.

  • To qualify for the minimum six years, the disability must be incurred in line of duty in a combat zone as designated by the Secretary of Defense OR incurred during the performance of duty in combat-related operations as designated by the Secretary of Defense. DoD policy for the "combat related operations" determination is that the disability must be incurred as a result of armed conflict.Veteran in uniform

Exclusion from DVA Recoupment

The amount of disability severance pay received under 10 U.S.C. § 1212 may be subject to recoupment by the VA. The member should contact the applicable VA office for more information. Effective January 28, 2008, and later, no deduction is made in the case of disability severance pay received by a member for a disability incurred in the line of duty in a combat zone or incurred during performance of duty in combat-related operations as designated by the Secretary of Defense. No deduction is made from any death compensation to which the former member’s dependents become entitled after the member’s death.

Exclusion from Federal Gross Income

  •  Disability Severance Pay is normally taxable income. However, it is not subject to tax withholding or reporting if at least one of the following two conditions exist:

    • As a direct result of armed conflictDisabled vet standing on top of a mountain

    • While performing in extra-hazardous service, even if the service does not directly involve combat

    • Under conditions simulating war, including maneuvers or training; or

  • By an instrumentality of war, such as weapons; or

  • The service member is entitled to disability compensation as determined by the VA or has received a proposed disability rating from the VA at the time of separation through the Integrated Disability Evaluation System.

A service member may request refund of taxes withheld from the gross taxable amount of their disability severance pay payment from DFAS if notification of disability compensation from the VA is received in the same tax year in which the member received disability severance pay.

A refund request must include documentation evidencing the VA’s award of disability compensation and must be received and processed by DFAS on or before December 31st of the year in which the disability severance pay payment was paid. If a refund is processed before December 31st, but after the Military Payroll Systems end of the year cut off (typically around December 20th), a corrected IRS Form W2c may be issued by DFAS.

Additional Information

For more information, please visit the following webpage maintained by the Department of Defense:

Volume 7B: “Military Pay Policy and Procedures – Retired Pay:

Volume 7A: “Military Pay Policy and Procedures – Active Duty and Reserve Pay

DoD Instruction 1332.18, “Disability Evaluation System (DES)”:

Air Force Instructions 36-3212, Physical Evaluation for Retention, Retirement and Separation:

Online Resource for Americans with Disabilities:

Document Review Date: 21 December 2023