Gold Star widows taxes skyrocket on children's survivor benefits.

[aceplace57]

I hadn’t heard about this change in the tax code.
Theresa Jones’ husband died serving our country and we quadruple the tax bill on the children’s survivor benefits? WTH?

This tax code change is so unjust and screwed up. I understand everyone has to pay taxes on income. My parents paid taxes on my dads military pension. But, 15,000 a year isn’t very much money to support two young children. The households primary provider died serving our country and this is how our nation treats the surviving families?

Jones works part-time and attends school. It seems very unlikely that she’s in a high income tax bracket. This makes no sense to me.

Do you understand the logic behind this new tax policy?

Gold Star widow "shocked" by new tax bill on sons' survivor benefits

This is more than a quadruple increase within a year!

The boys each received about $15,000 in survivor benefits last year. Jones was hit with a tax bill of $5,400 for them, up from $1,100 from the previous year.

Because a surviving spouse can’t receive both Veteran Affairs and Defense Department benefits simultaneously in full, Gold Star parents often sign the taxable DOD benefits over to their children. But the new tax law lumps Gold Star children into a bracket known as the “kiddie tax” at 37 percent, much higher than their previous tax rate.

[aceplace57]

Much longer article and explanation of the increased tax on survivor benefits.

Congress needs to correct this excessive tax ASAP. IMHO
https://www.google.com/amp/s/www.military.com/daily-news/2019/04/23/years-tax-cut-cost-some-gold-star-families-dearly.html/amp

Military widows and widowers who put their benefits in their child’s name saw a significant spike in their taxes this year. To make matters worse, Jones, along with three other military widows who spoke with Task & Purpose, said they were not aware how much their taxes would increase and were unable to budget or otherwise prepare for the hike in cost.

“It was a very hard pill to swallow, that they’re even taxed; that they have to give money back in general, as kids,” said Jones, who provided Task & Purpose with copies of her tax documents for 2018 and 2017. “I’ve been sitting here for four days trying to figure out why it’s so much more.”

“I looked at it and realized this is going to be something that’s going to happen every year so this is going to have to be calculated into the monthly budget now,”

[DinoR]

@aceplace57

But, 15,000 a year isn’t very much money to support two young children.

Conveniently that’s not what the family is receiving to help support two children. That’s $15 per child; it’s right there in bits you quote in the OP. There’s also some VA survivor benefits that the mother qualifies for. That’s the reason that some sign the DOD benefits over to their children since they can’t take both. The VA benefits are relatively limited for most people so we’re not even talking about all the kids that rate DOD survivor benefits facing this tax. For many the benefit is paid to their surviving parent and taxed accordingly.

The benefits signed over to minor dependents count as unearned income. That’s the problem. That’s the kind of thing we typically associate with minors with trust funds. I think if you did a poll asking if trust fund babies should get taxed at a relatively high rate there’d be pretty broad support for it. I’d be surprised if anyone in Congress really considered those receiving survivor benefits when amending that section of the tax code. They were taxing well off kids with relatively large trust funds. Unintended consequences can suck.

I agree Congress should correct the law to fix a flaw that probably wasn’t their intention. I’m not surprised things like this happen, though. When you make big changes to complex bureaucratic systems strange shit happens.

[aceplace57]

The reports wording is a bit confusing.
.37 x 15000 = 5550

The report says the tax bill for them is $5400. Sounded like the total income is about 15k.

You’re right. It does say each gets about 15k. Doubling the reported tax bill.

I didn’t think about richTrust fund kids. 37 percent tax makes more sense. Thank you for pointing that out.