There's no such thing as "disability severance pay". It's either severance pay, or disability pay. Severance pay is 100% taxable income. Period. However, in a case where disability pay was retroactive, the letter you got from the VA should give you a "retroactive back to" date. So if your severance pay was paid before that date, it's still taxable income. If paid after that date, then it "converts" to disability pay and you can treat it as such. Finally, sometimes the letter from the VA will specifically state that it includes severance pay regardless of when that severance was paid.
