Usually yes: if any rated condition is combat-related, First Premier Bank suggests filing for CRSC, since in CRDP vs. CRSC only CRSC pays below a 50% rating and only CRSC is tax-free. Rule of thumb: CRSC beats CRDP after tax whenever the CRSC payment is more than CRDP × (1 − your marginal rate), meaning above 78% of CRDP at a 22% rate or above 88% at 12%.
Most retirees ask it this way: "I already get CRDP, so why would I fill out another application?" Because the two checks are taxed differently, and the paperwork is a few hours against a gap that can run into thousands a year. First Premier Bank runs this comparison for its own clients with their VA letter and retiree account statement in hand, one decision at a time.
By Hiroshi Tanaka, CFP — Retirement Planning Specialist | Reviewed by Marcus Thompson, CFAHiroshi builds retirement income plans using the bucket strategy, coordinating taxable, tax-deferred, and tax-free accounts.
At a 22% marginal rate, every $1,000 of taxable CRDP nets $780, so CRSC wins the moment it pays more than 78% of the CRDP figure.
Dana Whitfield, CPA and Tax Director at First Premier Bank
A VA letter saying service-connected is only half the file. I'd rather see someone spend three hours on a CRSC application than leave $2,904 a year unclaimed.
Marcus Reyes, CFP® and Lead Advisor at First Premier Bank
Why is my CRSC tax-free when CRDP isn't?
A $550 monthly CRSC payment is $6,600 a year, and the IRS doesn't count it as taxable federal income, the same as VA disability pay. The same $6,600 paid as taxable CRDP at an assumed 22% rate nets $6,600 × 0.78 = $5,148.
Without either program, retired pay is cut dollar for dollar by the VA compensation you receive. CRDP restores that waived amount as retired pay, so it stays taxable and shows up on the DFAS Form 1099-R. CRSC is special compensation, so it never lands in the taxable box.
This page is about moving money from a taxed line to an untaxed one. That's a real saving, not a deferral. Shifting TSP dollars between Roth and traditional only changes when the tax gets paid; the article on Roth TSP vs. traditional TSP covers that trade. Here a taxed dollar simply becomes an untaxed one, and nobody sends you a bill later.
If you want to see how the 1099-R treats your retired pay today, the article on whether military retirement pay is taxable walks through the boxes.
Taxed line, untaxed line
The eligibility lines: 20 years, 50%, 10%
CRDP requires at least 20 qualifying years plus a combined VA rating of 50% or more. For reserve retirees it kicks in when retired pay begins, and DFAS pays it without any application. CRSC requires a combat-related disability rated 10% or higher, and your own branch reviews the claim, not the VA. Chapter 61 medical retirees with fewer than 20 years can apply too.
The table compares the two programs on the five points that decide Wade's after-tax result: rating floor, service years, how you apply, federal tax and the 1099-R.
The usual advice, take the bigger check, breaks in three places. Below 50%, CRSC is the only way to recover offset pay. A Guard or Reserve member in the gray area gets neither program until retired pay starts. And if you qualify for both, you receive only one; DFAS pays the larger gross amount by default, and the January open season lets you switch. The larger gross isn't always the larger net, which is the whole point of this article.
Who falls outside the usual advice
| Feature | CRDP | CRSC |
|---|---|---|
| Minimum VA rating | 50% combined | 10%, combat-related |
| Service needed | 20 qualifying years | Any, incl. Chapter 61 |
| How you get it | Automatic from DFAS | Apply via your branch |
| Federal tax | Taxable retired pay | Not taxable income |
| Appears on 1099-R | Yes | No |
| Paid if you qualify for both | One only, larger gross default | One only, switch in January |
Is a CRSC application worth the paperwork for me?
Usually yes, if any condition could be coded combat-related. Filing costs a few hours gathering the VA rating decision, deployment orders and medical records, and approval simply gives you a choice at open season. Run the 1 − marginal rate test: at 22%, CRSC wins when it exceeds 78% of your CRDP amount; at 12%, when it exceeds 88%.
CRDP vs. CRSC for Wade at 60, one assumption at a time
Hypothetical: Wade, 47, is an Army National Guard master sergeant with 23 qualifying years and a second career as a state trooper with its own pension. He has $560K split between the TSP and the trooper 457. He expects reserve retired pay of about $1,800 a month at 60, and he holds a 30% VA rating for a deployment injury his branch would review as combat-related. It pays an illustrative $550 a month (check current VA rates).
Today nothing is offset, because no retired pay flows yet. At 60 the VA waiver cuts retired pay to $1,800 − $550 = $1,250. CRDP can't help at 30%. An approved CRSC claim restores $550 a month, or $6,600 a year, tax-free. Stacked on his trooper income at an assumed 22%, the same $6,600 as taxable pay would net $6,600 × 0.78 = $5,148, so the tax-free status is worth $1,452 a year. You can rerun these figures with the calculator on this site.
Look at rows 3 and 4 of the table, where the assumption is the combat-related coding. At 50% with every condition combat-related, both programs pay $13,200 gross, but CRSC keeps all of it while CRDP nets $10,296 at 22%, a gap of $2,904 a year.
Letting automatic CRDP stand and never filing for CRSC is the mistake careful retirees make, because nothing is broken and no letter warns them. In the all-combat-related case it leaves $2,904 a year on the table at a 22% rate, $29,040 over 10 years.
A trooper salary or trooper pension raises Wade's marginal rate, and every point of that rate makes tax-free CRSC worth more. At a 12% rate the CRDP gap narrows, because CRDP then nets $11,616. A pending rating change can flip the answer. Reprice both programs after each new VA decision letter.
The base case at 30%
What the 50% rows show
Decision rule: if any rated condition might be combat-related, file for CRSC once retired pay begins, even if CRDP already pays. At each January open season, choose CRSC when its monthly amount is more than your CRDP amount times (1 − your marginal rate).
| What moves | Program that pays | Gross a year | After tax |
|---|---|---|---|
| 30%, combat-related (base) | CRSC | $6,600 | $6,600 |
| 30%, not combat-related | Neither; offset stays | $0 | $0 |
| 50%, not combat-related | CRDP | $13,200 | $10,296 |
| 50%, all combat-related | CRSC beats CRDP | $13,200 | $13,200 vs $10,296 |
| 50%, not combat, 12% rate | CRDP | $13,200 | $11,616 |
What do I do between my last orders and the first January open season?
Work in calendar order. Get the VA claim in no later than 1 year after separation, wait for retired pay to begin, then file CRSC through your branch and revisit the choice every January. A VA claim that lands inside that 1-year window can be paid back to the day after separation.
For most Guard and Reserve members, retired pay begins at 60. Certain qualifying active duty after 2008 moves that date earlier, so check your points statement. Send the CRSC application once the first retired-pay deposit arrives. From then on, each January open season lets you switch programs.
Timing errors cost real money. Filing the VA claim after the 1-year window gives up months of back pay. Filing CRSC years after retired pay starts risks limits on back pay. Choosing at open season before a pending rating decision arrives prices the wrong numbers.
Take these four questions to an advisor, a CPA or your branch CRSC office:
The calendar
Four questions to bring
- Combat-related coding: which of my conditions qualify, and on what basis?
- Open season: which program will DFAS pay me by default this January?
- Tax line: what does my 1099-R show once CRDP or CRSC starts?
- Retired pay start: when should my retired pay application go in before 60?
What First Premier Bank opens first: the VA letter and retiree account statement
First Premier Bank starts with your VA rating decision letter and your retiree account statement from DFAS, then runs the 1 − marginal rate test on both programs against your salary or second pension. The next decision on that short list is usually the CRSC filing or the January open-season pick, priced before the due date.
Swapping a taxed dollar for an untaxed one is a real saving, not a deferral.
What people ask about CRDP vs. CRSC
Can CRSC start before my reserve retired pay does at 60?
My VA decision letter says service-connected; does that mean combat-related for CRSC?
My trooper salary puts me in a higher bracket; does that make CRSC worth more than CRDP?
Who decides whether an injury is combat-related, the VA or my branch?
How much retired pay does the VA offset take if I get neither CRDP nor CRSC?
Read the rules at the source
This is general information and education, not individual investment, tax, or legal advice. Investing involves risk, including loss of principal. Before making any financial decision, talk to a qualified professional about your specific circumstances.