**§3.272 Exclusions from income.**

The following shall be excluded from countable income for the purpose of
determining entitlement to improved pension. Unless otherwise provided,
expenses deductible under this section are deductible only during the
12-month annualization period in which they were paid. (Authority: 38
U.S.C. 501(a))

\(a\) *Welfare*. Donations from public or private relief, welfare, or
charitable organizations. (Authority: 38 U.S.C. 1503(a)(1))

\(b\) *Maintenance*. The value of maintenance furnished by a relative,
friend, or a charitable organization (civic or governmental ) will not
be considered income. Where the individual is maintained in a rest home
or other community institution or facility, public or private, because
of impaired health or advanced age, money paid to the home or the
individual to cover the cost of maintenance will not be considered
income, regardless of whether it is furnished by a relative, friend, or
charitable organization. The expense of maintenance is not deductible if
it is paid from the individual's income. (Authority: 38 U.S.C. 501(a),
1503(a)(1))

\(c\) *Department of Veterans Affairs pension benefits*. Payments under
chapter 15 of title 38, United States Code, including accrued pension
benefits payable under 38 U.S.C. 5121. (Authority: 38 U.S.C. 1503(a)(2))

\(d\) *Reimbursement for casualty loss*. Reimbursement of any kind for
any casualty loss. The amount to be excluded is not to exceed the
greater of the fair market value or the reasonable replacement cost of
the property involved at the time immediately preceding the loss. For
purposes of this paragraph, the term *casualty loss* means the complete
or partial destruction of property resulting from an identifiable event
of a sudden, unexpected or unusual nature. (Authority: 38 U.S.C.
1503(a)(5))

\(e\) *Profit from sale of property*. Profit realized from the
disposition of real or personal property other than in the course of
business, except amounts received in excess of the sales price, for
example, interest on deferred sales is included as income. In
installment sales, any payments received until the sales price is
recovered are not included as income, but any amounts received which
exceed the sales price are included, regardless of whether they
represent principal or interest. (Authority: 38 U.S.C. 1503(a)(6))

\(f\) *Joint accounts*. Amounts in joint accounts in banks and similar
institutions acquired by reason of death of the other joint owner.
(Authority: 38 U.S.C. 1503(a)(7))

\(g\) *Medical expenses*. Within the provisions of the following
paragraphs, there will be excluded from the amount of an individual's
annual income any unreimbursed amounts which have been paid within the
12-month annualization period for medical expenses regardless of when
the indebtedness was incurred. An estimate based on a clear and
reasonable expectation that unusual medical expenditure will be realized
may be accepted for the purpose of authorizing prospective payments of
benefits subject to necessary adjustment in the award upon receipt of an
amended estimate, or after the end of the 12-month annualization period
upon receipt of an eligibility verification report. (Authority: 38
U.S.C. 501(a))

\(1\) *Veteran's income*. Unreimbursed medical expenses will be excluded
when all of the following requirements are met:

\(i\) They were or will be paid by a veteran or spouse for medical
expenses of the veteran, spouse, children, parents and other relatives
for whom there is a moral or legal obligation of support;

\(ii\) They were or will be incurred on behalf of a person who is a
member or a constructive member of the veteran's or spouse's household;
and

\(iii\) They were or will be in excess of 5 percent of the applicable
maximum annual pension rate or rates for the veteran (including
increased pension for family members but excluding increased pension
because of need for aid and attendance or being housebound) as in effect
during the 12-month annualization period in which the medical expenses
were paid.

\(2\) *Surviving spouse's income*. Unreimbursed medical expenses will be
excluded when all of the following requirements are met:

\(i\) They were or will be paid by a surviving spouse for medical
expenses of the spouse, veteran's children, parents and other relatives
for whom there is a moral or legal obligation of support;

\(ii\) They were or will be incurred on behalf of a person who is a
member or a constructive member of the spouse's household; and

\(iii\) They were or will be in excess of 5 percent of the applicable
maximum annual pension rate or rates for the spouse (including increased
pension for family members but excluding increased pension because of
need for a}d and attendance or being housebound) as in effect during the
12-month annualization period in which the medical expenses were paid.
(Authority: 38 U.S.C. 501(a))

\(3\) *Children's income*. Unreimbursed amounts paid by a child for
medical expenses of self, parent, brothers and sisters, to the extent
that such amounts exceed 5 percent of the maximum annual pension rate or
rates payable to the child during the 12-month annualization period in
which the medical expenses were paid. (Authority: 38 U.S.C. 501(a))

\(h\) *Expenses of last illnesses, burials, and just debts*. Expenses
specified in paragraphs (h)(1) and (h)(2) of this section which are paid
during the calendar year following that in which death occurred may be
deducted from annual income for the 12-month annualization period in
which they were paid or from annual income for any 12-month
annualization period which begins during the calendar year of death,
whichever is to the claimant's advantage. Otherwise, such expenses are
deductible only for the 12-month annualization period in which they were
paid. (Authority: 38 U.S.C. 501(a))

\(1\) *Veteran's final expenses*.

\(i\) Amounts paid by a spouse before a veteran's death for expenses of
the veteran's last illness will be deducted from the income of the
surviving spouse. (Authority: 38 U.S.C. 1503(a)(3))

\(ii\) Amounts paid by a surviving spouse or child of a veteran for the
veteran's just debts, expenses of last illness and burial (to the extent
such burial expenses are not reimbursed under Chapter 23 of Title 38,
United States Code) will be deducted from the income of the surviving
spouse or child. The term "just debts" does not include any debt that is
secured by real or personal property. (Authority: 38 U.S.C. 1503(a)(3))

\(2\) *Spouse or child's final expenses*.

\(i\) Amounts paid by a veteran for the expenses of the last illness and
burial of the veteran's deceased spouse or child will be deducted from
the veteran's income.

\(ii\) Amounts paid by a veteran's spouse or surviving spouse for
expenses of the last illness and burial of the veteran's child will be
deducted from the spouse's or surviving spouse's income. (Authority: 38
U.S.C. 1503(a)(4))

\(i\) *Educational expenses*. Amounts equal to expenses paid by a
veteran or surviving spouse pursuing a course of education or vocational
rehabilitation or training, to include amounts paid for tuition, fees,
books, and materials, and in the case of a veteran or surviving spouse
in need of regular aid and attendance, unreimbursed amounts paid for
unusual transportation expenses in connection with the pursuit of such
course. Unusual transportation expenses are those exceeding the
reasonable expenses which would have been incurred by a nondisabled
person using an appropriate means of transportation (public
transportation, if reasonably available). (Authority: 38 U.S.C.
1503(a)(9))

\(j\) *Child's income*. In the case of a child, any current work income
received during the year, to the extent that the total amount of such
income does not exceed an amount equal to the sum of the following:

\(1\) The lowest amount of gross income for which a Federal income tax
return must be filed, as specified in section 6012(a) of the Internal
Revenue Code of 1954, by an individual who is not married (as determined
under section 143 of such Code), and is not a surviving spouse (as
defined in section 2(a) of such Code), and is not a head of household
(as defined in section 2(b) of such Code); and

\(2\) If the child is pursuing a course of postsecondary education or
vocational rehabilitation or training, the amount paid by the child for
those educational expenses including the amount paid for tuition, fees,
books, and materials. (Authority: 38 U.S.C. 1503(a)(10))

\(k\) *Domestic Volunteer Service Act Programs*. Payments received under
a Domestic Volunteer Service Act (DVSA) Program (including Volunteers in
Service to America (VISTA), University Year for ACTION (UYA), Foster
Grandparent Program (FGP), Retired Senior Volunteer Program (RSVP),
Senior Companion Program) shall be excluded as provided in paragraphs
(k)(1) and (2) of this section:

\(1\) All DVSA payments received before December 13, 1979, shall be
excluded from determining entitlement to improved pension. (Authority:
42 U.S.C. 5044(g) (1973))

\(2\) DVSA payments received after December 12, 1979, shall be excluded
from determining entitlement to improved pension unless the Director of
the ACTION Agency has determined that the value of all DVSA payments,
adjusted to reflect the number of hours served by the volunteer, equals
or exceeds the minimum wage then in effect under the Fair Labor
Standards Act of 1938 or the minimum wage of the State where the
volunteer served, whichever is the greater. (Authority: 42 U.S.C.
5044(g) (1979))

\(l\) *Distributions of funds under 38 U.S.C. 1718*. Distributions from
the Department of Veterans Affairs Special Therapeutic and
Rehabilitation Activities Fund as a result of participation in a
therapeutic or rehabilitation activity under 38 U.S.C. 1718 and payments
from participation in a program of rehabilitative services provided as
part of the care furnished by a State home and which is approved by VA
as conforming to standards for activities under 38 U.S.C. 1718 shall be
considered donations from a public or private relief or welfare
organization and shall not be countable as income for pension purposes.
(Authority: 38 U.S.C. 1718(f))

\(m\) *Hardship exclusion of child's available income*. When hardship is
established under the provisions of §3.23(d)(6) of this part, there
shall be excluded from the available income of any child or children an
amount equal to the amount by which annual expenses necessary for
reasonable family maintenance exceed the sum of countable annual income
plus VA pension entitlement computed without consideration of this
exclusion. The amount of this exclusion shall not exceed the available
income of any child or children, and annual expenses necessary for
reasonable family maintenance shall not include any expenses which were
considered in determining the available income of the child or children
or the countable annual income of the veteran or surviving spouse.
(Authority: 38 U.S.C. 1521(h), 1541(g))

\(n\) *Survivor benefit annuity*. Annuity paid by the Department of
Defense under the authority of section 653, Public Law 100-456 to
qualified surviving spouses of veterans who died prior to November 1,
1953. (September 29, 1988) (Authority: Sec. 653, Pub. L. 100-456; 102
Stat. 1991)

\(o\) *Agent Orange settlement payments*. Payments received by any
person in settlement of the case of *In re Agent Orange product
liability litigation* in the United States District Court for the
Eastern District of New York (M.D.L. No. 381). (January 1, 1989)
(Authority: Pub. L. 101-201, 103 Stat. 1795)

\(p\) *Restitution to individuals of Japanese ancestry*. Any payment
made as restitution under Public Law 100-383 to individuals of Japanese
ancestry who were interned, evacuated, or relocated during the period
December 7, 1941, through June 30, 1946, pursuant to any law, Executive
order, Presidential proclamation, directive, or other official action
respecting these individuals. (August 10, 1988) (Authority: Sec. 105,
Pub. L. 100-383; 102 Stat. 905)

\(q\) *Cash surrender value of life insurance*. That portion of proceeds
from the cash surrender of a life insurance policy which represents a
return of insurance premiums. (Authority: 38 U.S.C. 501(a))

\(r\) *Income received by American Indian beneficiaries from trust or
restricted lands*. Income of up to \$2,000 per calendar year to an
individual Indian from trust lands or restricted lands as defined in 25
CFR 151.2. (January 1, 1994) (Authority: Sec. 13736, Pub. L. 103-66; 107
Stat. 633)

\(s\) *Radiation Exposure Compensation Act*. Any payment made under
Section 6 of the Radiation Exposure Compensation Act of 1990.
(Authority: 42 U.S.C. 2210 note)

\(t\) *Alaska Native Claims Settlement Act*. Any receipt by an
individual of cash (including cash dividends on stock received from a
Native Corporation) to the extent that it does not, in the aggregate,
exceed \$2,000 per individual per annum; stock (including stock issued
or distributed by a Native Corporation as a dividend or distribution on
stock); a partnership interest; land or an interest in land (including
land or an interest in land received from a Native Corporation as a
dividend or distribution on stock); and an interest in a settlement
trust. (November 2, 1994) (Authority: §506, Pub. L. 103-446)

\(u\) *Monetary allowance under 38 U.S.C. chapter 18 for certain
individuals who are children of Vietnam veterans*. Any allowance paid
under the provisions of 38 U.S.C. chapter 18 to or for an individual who
is a child of a Vietnam veteran. (Authority: 38 U.S.C. 1833(c))

\(v\) *Victims of Crime Act*. Amounts received as compensation under the
Victims of Crime Act of 1984 unless the total amount of assistance
received from all federally funded programs is sufficient to fully
compensate the claimant for losses suffered as a result of the crime.
(Authority: 42 U.S.C. 10602(c))

\(w\) *Medicare Prescription Drug Discount Card and Transitional
Assistance Program*. The payments received under the Medicare
transitional assistance program and any savings associated with the
Medicare prescription drug discount card. (Authority: 42 U.S.C.
1395w--141(g)(6))

\(x\) *Life insurance proceeds*. Lump-sum proceeds of any life insurance
policy on a veteran. (Authority: 38 U.S.C. 1503(a)(11))

\[44 FR 45936, Aug. 6, 1979, as amended at 46 FR 9580, Jan. 29, 1981; 53
FR 23235, June 21, 1988; 53 PR 24831, June 30, 1988; 56 FR 65846, Dec.
19, 1991; 57 FR 59300, Dec. 15, 1992; 58 FR 25563, Apr. 27, 1993; 59 FR
35266, July 11, 1994; 59 FR 37696, July 25, 1994; 59 FR 45976, Sept. 6,
1994; 60 FR 2523, Jan. 10, 1995; 60 FR 18355, Apr. 11, 1995; 62 FR 5528,
Feb. 6, 1997; 62 FR 51279, Sept. 30, 1997; 67 FR 9209, Feb. 28, 2002; 67
FR 49587, July 31, 2002; 68 FR 60852, Oct. 24, 2003; 70 FR 15591, Mar.
28, 2005; 71 FR 44918, Aug. 8, 2006\]

> **Supplement *Highlights* references**: 6(2), 7(5), 12(4, 7), 13(2),
> 14(4), 15(3), 27(1), 31(1), 51(1), 54(2), 61(1), 65(1), 72(2).