The 2017 Tax Cuts and Jobs Act drastically raised the tax burden on survivors benefits received by Gold Star military families
WASHINGTON - U.S. Senator Amy Klobuchar (D-MN) is urging the U.S. Department of the Treasury to urgently act to prevent changes in the 2017 Tax Cuts and Jobs Act from unduly harming Gold Star military families. Under current law, spouses of deceased service members are eligible to receive two different survivors benefits--the Department of Veterans Affairs' Dependency and Indemnity Compensation and the Department of Defense (DOD) Survivor Benefits Plan. Many spouses choose to sign the taxable DOD benefit over to their children. Previously, children receiving this benefit were taxed at the parent's rate, but President Trump's Tax Cuts and Jobs Act made changes to certain tax provisions that now treat the survivors benefit going to children as a trust or estate. As a result, the benefit can now be taxed at much higher rates--up to 37 percent compared with an average of 12 percent to 15 percent prior to the 2017 tax bill.
"The effects of this change have been devastating to Gold Star families, who previously paid an average of 12 to 15 percent in taxes on this survivor benefit and have now been forced to pay significantly more without adequate preparation," Klobuchar wrote. "This is an unacceptable burden on families who have already made the ultimate sacrifice for this country."
Klobuchar urged Secretary Mnuchin to urgently assess options to prevent the harms created by this tax code change for Gold Star families.
Full text of the letter can be found below:
Dear Secretary Mnuchin:
I write to urge you to take immediate action to prevent unnecessary harm to Gold Star military families as a result of a provision of the 2017 Tax Cuts and Jobs Act.
Recent reports have highlighted how changes to the "Children with Unearned Income" tax bracket have significantly increased the tax burden for our nation's Gold Star families--in some cases by thousands of dollars. Accordingly, I respectfully request that the Department of the Treasury urgently assess what it can do to rectify this unfair burden on families who have sacrificed so much for our country.
Under current law, spouses of deceased service members are eligible to receive two different survivor benefits--the Department of Veterans Affairs' Dependency and Indemnity Compensation and the Department of Defense (DOD) Survivor Benefits Plan. However, surviving spouses are not currently able to receive both benefits simultaneously in full, and many of these spouses choose to sign the taxable DOD benefit over to their children. Previously, children receiving this benefit were taxed at the parent' rate but due to changes in President Trump' Tax Cuts and Jobs Act survivors benefits going to children are now treated as a trust or estate--resulting in a much higher tax rate for these children, up to 37 percent.
The effects of this change have been devastating to Gold Star families, who previously paid an average of 12 to 15 percent in taxes on this survivor benefit and have now been forced to pay significantly more without adequate preparation. For example, one Gold Star widow who lost her husband in Iraq in 2007 saw the taxes on her 14-year-old son's survivor benefits increase from roughly $100 and $200 per year to about $2,500 this year.[i] This is an unacceptable burden on families who have already made the ultimate sacrifice for this country.
Republicans on the House Ways and Means Committee have reportedly described this impact on Gold Star families as an"unintended consequence" of the tax bill.[ii] I understand that Treasury is "evaluating what can be done to solve this issue,"[iii] and ask that you expedite this evaluation and work as quickly as possible to identify solutions and prevent these changes from hurting our military families.
The families of our fallen heroes are owed our gratitude. I urge you to work with Congress as we make every effort to ease their burden.
Sincerely,
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[i] https://taskandpurpose.com/trump-tax-cut-widows
[ii] https://www.cnn.com/2019/04/26/politics/military-families-tax-change-trump/index.html
[iii] https://www.cbsnews.com/news/gold-star-widow-shocked-by-new-tax-bill-on-her-sons-survivor-benefits/
