Gold Star families who saw huge tax bill hikes could get relief from Congress

A bipartisan group of House lawmakers is pushing for a quick fix to tax law changes that left some families of fallen troops owing thousands more to the government this year.

At issue is how taxes of survivor benefits are handled. In previous years, money given by the military to the children of troops who died on duty were taxed at the same rate as their surviving parents.

But under changes included in the December 2017 tax law overhaul, those benefits were instead treated the same as family estate transfers, which increased the tax rate from no more than 15 percent up to 37 percent. That translated into hefty tax bills for many of those military families this spring.

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The issue was first reported by the news site Task & Purpose. Bill sponsor Rep. Elaine Luria, D-Va. and a Navy veteran, said she heard of the problem from families in her district.

“Gold Star Families have already paid the ultimate price, so it broke my heart when a surviving spouse from Coastal Virginia alerted me to this injustice,” she said in a statement. “I knew I had to fight in Congress to fix a broken system that should be working for her and her family.”

The issue only affects spouses of fallen troops who opted to sign over the death benefits to their children, a common practice designed to maximize what the family may be eligible to receive.

Luria’s measure would reverse the tax law changes for those benefits and be made retroactive for taxes paid this year.

Already seven Republicans and seven Democrats — several of them military veterans — have signed on to support the plan.

“Children of those who have paid the highest measure of devotion to our country shouldn’t be burdened with the highest tax rate for their survivor benefits,” said Rep. Michael Waltz, R-Fla. and an Army veteran. He said he would push for chamber leadership to pass the measure quickly.

Outside advocates like the Tragedy Assistance Program for Survivors have noted in recent weeks that Congress could also avoid the tax issues by solving underlying problems with military death benefits that force families to transfer everything into their children’s names.

They are pushing for broader reforms of those payouts, in hopes of solving multiple issues complicating those military families’ finances.

No timeline has been set for committee hearings or a chamber vote on Luria’s bill.

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