Starting a business can feel like a lifeline. For many veterans, entrepreneurship offers flexibility, purpose, and a way to work around physical or mental limitations. At the same time, a very real fear often sits in the background: “If I start a business, will I lose my VA disability benefits?”
The short answer is that most veterans can legally own and operate a business without losing their VA disability benefits. The long answer is more nuanced, especially for those receiving benefits based on unemployability. Understanding the difference is critical before taking the leap into self-employment.
Leah breaks down how VA disability benefits interact with business ownership, what situations may trigger closer scrutiny, and how veterans can protect themselves while pursuing entrepreneurship.
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Can You Own a Business While Receiving VA Disability Benefits?
In general, yes. Veterans who receive VA disability compensation based on their disability ratings are not restricted in how much income they earn. There is no income cap tied to standard VA disability ratings.
You can work a job, start a business, own multiple businesses, or earn income from investments while continuing to receive your disability compensation. Even very high earnings do not automatically affect benefits that are based solely on schedular disability ratings.
VA disability compensation is not a needs based program. It is compensation for service connected disabilities, not a replacement for income. As a result, owning a business alone does not disqualify a veteran from receiving benefits.
When Income Does Matter: Understanding TDIU
Where things become more complicated is with Total Disability based on Individual Unemployability, commonly referred to as TDIU.
TDIU is granted when a veteran’s service connected disabilities do not add up to a 100 percent schedular rating, but the VA determines that those disabilities prevent the veteran from securing or maintaining substantially gainful employment. In those cases, the veteran is paid at the 100 percent rate even though their combined rating is lower.
Because TDIU is specifically based on unemployability, income and work activity become relevant. If a veteran on TDIU appears capable of maintaining substantially gainful employment, the VA may reassess their eligibility for TDIU.
This does not mean veterans on TDIU are automatically barred from owning a business. It does mean that the nature of the work, the income level, and the veteran’s role in the business matter.
100 Percent Schedular vs TDIU
It is essential to understand the difference between a 100 percent schedular rating and TDIU.
A 100 percent schedular rating is based on the severity of service connected disabilities as defined by VA regulations. If a veteran is rated 100 percent schedular, income does not matter. The VA will not reduce benefits simply because the veteran starts a business or becomes highly successful.
If the 100 percent rating is considered total and permanent, the VA generally will not reexamine the rating unless there is evidence of fraud or the veteran requests a review.
TDIU, on the other hand, is tied to the veteran’s ability to work. Even when TDIU is considered total and permanent, the VA still monitors earnings through Social Security records. If income rises above certain thresholds, the VA may take another look.
What Counts as Substantially Gainful Employment?
The VA uses the federal poverty threshold as a general benchmark for substantially gainful employment. While the exact amount can vary, it is roughly equivalent to about $1,200 per month.
Earnings below this level are generally considered marginal employment. Veterans earning under this threshold are typically considered safe from losing TDIU based on income alone.
Earnings above the poverty threshold may trigger a review, especially if they appear consistent and ongoing. However, income is not the only factor. The VA also looks at how the income is earned.
Active vs Passive Income
One of the most important distinctions in business ownership is the difference between active and passive income.
Active income comes from work you actively perform. Running day to day operations, managing clients, providing services, or handling sales all suggest active employment. If a veteran on TDIU is actively running a business that looks similar to full time work, the VA may conclude that the veteran is employable.
Passive income, on the other hand, does not involve regular labor. Examples include rental income where management is handled by others, dividends from investments, or certain types of royalties.
Owning a rental property does not automatically count as employment. If the veteran hires others to manage tenants, maintenance, and showings, and simply receives rental income, that income is generally considered passive. If the veteran is personally managing multiple properties, coordinating repairs, and handling tenants, the VA may view it as active employment.
Each case is fact specific, and the VA often looks closely at the level of involvement.
Sheltered and Self Employment Situations
Self employment introduces gray areas. Some veterans can work only under highly flexible conditions due to their disabilities. Owning a business may allow irregular hours, limited workloads, and accommodations that traditional employment would not.
The VA may consider whether the business functions as a sheltered work environment. Indicators can include very limited hours, a small number of clients, irregular schedules, and accommodations that would not exist in competitive employment.
For example, a veteran may only be able to work a few hours a week, see a very limited number of clients, or stop working entirely during flare ups. Even if the business exists, these limitations can support the continued need for TDIU.
Social Security Earnings and VA Monitoring
The VA has access to Social Security earnings records. When taxes are filed and income is reported, that information can make its way to the VA through interagency data sharing.
Veterans are often surprised to learn that they are not legally required to proactively notify the VA every time they attempt work. The VA typically evaluates earnings after the fact. If earnings exceed the poverty threshold, the VA may issue a proposed reduction or severance of TDIU.
Before any reduction becomes final, veterans are entitled to due process, including notice and the opportunity to respond.
Trying to Work and Failing
Attempting to work does not automatically disqualify a veteran from TDIU. Many veterans try to return to work only to find that their disabilities prevent sustained employment.
The VA generally looks for evidence of sustained, substantially gainful employment over time. Short lived jobs or businesses that fail due to service connected limitations often support, rather than undermine, a TDIU claim.
Veterans should not be afraid to try. An unsuccessful attempt at self employment can demonstrate that disabilities still interfere with the ability to maintain work.
Keeping Records as a Self Employed Veteran
Good documentation is one of the strongest protections for veterans who own businesses while receiving benefits.
Keeping detailed logs of hours worked is especially important. Even though self employed individuals are not required to clock in and out, having written records can demonstrate limited work capacity.
Tracking the number of clients, projects, or tasks completed can also help show the scope of work. In addition, maintaining accurate accounting records ensures that gross revenue is not mistaken for personal income. Business expenses, overhead, and operating costs matter.
Working with a bookkeeper or accountant is not only good business practice but also helpful if the VA questions income.
Programs That Support Veteran Entrepreneurs
There are legitimate programs designed to help veterans transition into business ownership.
Vocational Rehabilitation and Education programs can provide training and education for veterans seeking new careers. These programs aim to help veterans become employable again, so they are usually not compatible with long term TDIU unless attempts at employment fail.
Veterans who start businesses can also register as disabled veteran owned businesses. This status can open doors to government contracting opportunities, reduced fees, and other incentives depending on the industry and location.
Many states offer additional benefits, such as reduced filing fees or targeted small business support. Local veteran entrepreneur groups, whether online or in person, can also be valuable sources of networking, mentorship, and community support.
Balancing Benefits and Quality of Life
For veterans on TDIU, the decision to start a business often comes down to a personal calculation. The difference between a schedular rating and the TDIU payment amount may be a few thousand dollars per month.
For some, the stability of guaranteed benefits outweighs the uncertainty of entrepreneurship. For others, the sense of purpose, flexibility, and fulfillment that comes from building something outweighs the risk.
Many veterans report greater overall happiness when they are able to contribute, create, and engage on their own terms. Even if TDIU is eventually reduced, the long term personal and financial benefits of business ownership may outweigh the short term loss.
Where to Get Help and Guidance
Veterans with questions should consider reaching out to Veteran Service Organizations for general guidance, especially when exploring benefits or vocational programs.
If the VA proposes to reduce or sever TDIU, it is critical to act quickly. Veterans have the right to request a predetermination hearing within 30 days of receiving notice. Consulting an accredited claims agent or VA accredited attorney can help veterans understand their options and protect their rights.
Getting informed before starting a business can prevent costly mistakes and unnecessary stress.
Final Thoughts
Starting a business does not automatically mean losing VA disability benefits. For most veterans, benefits are secure regardless of income. For those on TDIU, careful planning, honest documentation, and realistic expectations are essential.
Entrepreneurship can be empowering, flexible, and deeply rewarding. With the right understanding and preparation, veterans can pursue business ownership while protecting the benefits they have earned.
Also Read: VA Disability for Fuelers
At Prestige Veteran Medical Consulting, a veteran-owned company, we specialize in Independent Medical Opinions (IMOs) known as Nexus letters.
Our purpose is to empower YOU, the veteran, to take charge of your medical evidence and provide you with valuable educational tools and research to guide you on your journey.
Understanding the unique challenges veterans face, our commitment lies in delivering exceptional service and support.
Leveraging an extensive network of licensed independent medical professionals, all well-versed in the medical professional aspects of the VA claims process, we review the necessary medical evidence to incorporate in our reports related to your VA Disability Claim.
Prestige Veteran Medical Consulting is not a law firm, accredited claims agent, or affiliated with the Veterans Administration or Veterans Services Organizations. However, we are happy to discuss your case with your accredited VA legal professional.
