Bill to overturn surprise 'Kiddie Tax' for Gold Star Families passes House

Photo credit U.S. Marine Corps photo by Cpl. Zachary Orr
By Connecting Vets

Gold Star families will hopefully see some sort of relief for the surprise tax bills they received this year after both the House and Senate passed separate versions of a bill overturning a provision of 2017 tax law.

Since surviving spouses cannot receive the full amount of both Veterans Affairs benefits and Department of Defense benefits at the same time, many parents pass along their DoD benefits to children. But the Kiddie Tax taxed those benefits at a rate as high as 37 percent, more than double the previous rate of about 12 to 15 percent.

Rep. Elaine Luria, D-Va., introduced a measure to effectively overturn the Kiddie Tax for Gold Star families, which was folded into the SECURE Act, which also included provisions to expand opportunities for retirement savings.

Luria’s fix will tax Gold Star kids’ benefits at the same rate as their parents', a lower rate than under the Kiddie Tax.

“I was proud to introduce the Gold Star Family Tax Relief Act to draw attention to this terrible taxation problem – and fix it,” Luria said. “It’s a triumph for both parties and America that the House got relief for Gold Star Families as part of the legislative package that passed today.”

The Senate also passed a standalone bill sponsored by Sen. Doug Jones, D-Ala., to effectively overturn the Kiddie Tax for Gold Star families.

“A number of families across our Coastal Virginia district have shared their stories about how this tax law changed their lives,” Luria said before the vote. “One woman, the widow of a Navy SEAL killed in Afghanistan, saw the taxes on her son’s benefits rise by $4,000 in 2018. Another by $6,000, another by $2,500. What this tax bill did to Gold Star families was wrong.”

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Follow Abbie Bennett, @AbbieRBennett.