Disabled veterans have made an enduring sacrifice for their country. These disabilities may exclude them from better-paying jobs or paid employment of any kind. Both federal and state legislators recognize the high price that disabled veterans have paid by offering a number of tax exemptions specifically for disabled vets.
On the federal level, disabled veterans can exclude all disability compensation and pension benefits from their gross income. That includes grants for homes or motor vehicles modified for greater accessibility [source: IRS]. Additionally, any money that a disabled vet earns as part of a Compensated Work Therapy (CWT) program is tax-exempt [source: IRS].
In addition, all 50 states offer some sort of property tax exemption for disabled vets [source: Duncan]. Some states require that the veteran be 100 percent disabled, while others are more generous. In general, the state property tax exemptions only cover a portion of the value of the home. Others limit the exemption based on income level.