For many Americans, President Donald Trump’s Tax Cuts and Jobs Act resulted in lower income and corporate tax rates. But an unintended consequence of the 2017 overhaul was a significant tax hike for families whose loved ones lost their lives while serving as active-duty military members.
Gold Star families, as they are commonly referred to, are eligible to receive two forms of compensation for their losses. One is a monthly stipend from the Department of Veterans Affairs, and the other is an insurance annuity from the Department of Defense. Because current law bars military widows from receiving the full amount of both benefits, some recipients choose to transfer the insurance annuity to their children to circumvent the rule.
Before the new tax code was implemented, children whose surviving parent put the benefits in their names were taxed at their parent’s rate. But after the tax code changed, the IRS began to tax the benefit as a trust or estate, which led to significant tax hikes. Gold Star families who previously faced 12% to 15% tax rates on the benefit started to report rates that were up to three times higher, according to Task and Purpose, a military-focused publication.
Legislators from both sides of the aisle, at the urging of Navy veteran and Democratic Congresswoman Elaine Luria, sought to fix the glitch before Memorial Day [...]