President Donald Trump’s tax overhaul is forcing some military families to pay thousands of dollars more in taxes on their survivor benefits, according to a nonprofit organization that helps those families.
Spouses who signed over their earned benefits to their children – a move that is done in order to ensure the family of a deceased service member temporarily receives all their benefits – saw an increase in taxes this year because the new tax law reclassified how children’s assets are taxed, Tragedy Assistance Program for Survivors says.
In past years, Gold Star families who chose this option paid an average of 12% to 15% in taxes on that income. Following the tax reform laws that went into effect in 2018, that tax rate jumped to 37%, according to the nonprofit.
Task & Purpose, a digital publication focused on military and veterans issues, first reported on the tax hike Tuesday.
A US Department of Treasury spokesperson told CNN, “We are deeply grateful for the sacrifices made by our brave service members and their families and we are evaluating what can be done to solve this issue and provide relief to the families of our fallen heroes.”
The issue is that survivors cannot get two types of military survivor benefits, one from the Defense Department and one from the Veterans Affairs Department, in full at the same time. But military widows and widowers can select the “Child Option” and sign over their Defense Department benefits to their children while they are minors in order to receive the full amount of both concurrently, according to the non-profit.
The new tax law, however, puts the children of service members “into a different tax bracket known as the ‘Kiddie Tax’ at a 37% tax rate,” according to an information sheet the organization released. The group suggests ending the benefits offset, “therefore resolving the issue.”
“My kids are owing the government back money that the government gave them because their dad died, and my kids have to pay it back,” Theresa Jones, whose husband was killed in a helicopter crash in 2013, told Task & Purpose.
The sweeping tax bill, signed into law by the President in December 2017, overhauled the US tax system and was the largest legislative achievement by Republicans that year.
“The tax bracket was created to prevent wealthy families from hiding money in their children’s names by taxing ‘unearned income’ for children at a higher rate. It is supposed to be a trust/estate tax,” according to the Tragedy Assistance Program for Survivors information sheet.