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You should speak to an attorney, preferably one associated with the VA.
A disability AWARD is different from 'usual' benefits. You need to know the difference (between award and disability benefit). And, your situation may be more/different from whatI had deal with so do check.)
Be aware that some employees in some of the VA departments do not know about these issues, which, unfortunately, further complicates it all.
Do google VA benefits and tax exemption. I have been through (some of) this although it had to do with a service connected Award which is not taxable.
I wish I could provide more clarify. "When in doubt, hire an attorney" (or in this case, see if one / non-profit attorney organization is associated with / to help veterans at no cost.
Gena / Touch Matters
Even if he doesn't have to file a federal tax return, it is worth filing a tax return. With computers, it is easy for the IRS to cross check income against tax returns. A more sinister problem is people who file tax returns using someone else's social security number. Filing taxes is usually the first place this type of fraud is caught by the legitimate owner of the SSN.
You don't need to pay anyone to file his tax return assuming that is all he is going to declare on his tax return. Most tax software allow multiple returns on the same copy of tax software. There are several legitimate internet sites like the IRS and Turbo tax, that offer free filing. In addition, AARP has Tax-Aide sites in all states which do preparation and filing of taxes for free. Before the pandemic, the Tax Aide group I was involved in, visited senior living centers.
BTW, Tax-Aide isn't only for seniors. They will do a wide range of tax situations including the forms due to being a self employed delivery person. However, if it has anything to do with depreciation or cost of goods, it is out-of-scope and Tax Aide can not do it. https://www.aarp.org/money/taxes/aarp_taxaide/
I would go to the IRS website which is a good one to ask this question once you know what your Father's yearly income is. There is a lot of free tax help out there also, so keep your eyes and ears open for his area. You need to be clear about the rules for both Federal and State.
Sure do wish you luck in getting the info you need specific to your Dad's case.
Also remember to go to search spy-glass next to your avatar; press that and type in taxes; there may be articles on AgingCare to help.
The above is a link to the IRS page that discusses who must file a return.
You should find out how much of his Assisted Living payments are tax deductible.