When congress passed tax reform, it inadvertently imposed a hefty tax on kids who have lost a parent to war or service-related injury or illness. The survivor benefits of Gold Star children are now taxed at the same rate as trust funds and inheritances. cnn.com/2019/10/28/pol…
In today’s Home⭐️Front column I tell the story of the Fry family. Gunnery Sgt. John Fry was an explosive ordnance disposal technician in the Marines. He had been disarming an improvised explosive device in Anbar Province when it exploded in 2006.
He left behind his wife, Malia Fry, and three children, ages 2, 7 and 9. To avoid having her monthly survivor benefits from the DoD cancelled out by the death benefit she receives from the VA (an offset known as the “widow’s tax”) Malia transferred the DoD benefits to her kids.
But that means a benefit that was supposed to last her entire life will now age our when her kids become 18 or, if they go to college, 22. That will happen in a few years and, as a result, she will have to sell her home.
Add to that, when she went to file her kids’ income taxes this year (that’s right, even her then-2-year-old filed taxes, as the kids are no longer her dependents because they receive a survivor benefit) the 12-13% tax on their benefits was now a 37% tax.
The survivor benefits of Gold Star children are now taxed at the same rate as trust funds and inheritances, an unintended side effect of the tax reform law passed by Congress in 2017 and signed into law by President Trump.
It’s become known as the “kiddie tax” and both Republicans and Democrats are united in wanting to change it. Each chamber has passed legislation to fix both the “kiddie tax” and the “widow’s tax,” but the full congress has not.
In the Senate the impasse is over the president’s diversion of DoD funds to build a border wall. What does that have to do with Gold Star Families? Nothing. Except ... that the “widow’s tax” fix is attached to the House bill that funds the DoD. And ...
... the bill also blocks DoD funds from being used for the wall, and the White House and Senate Republicans oppose that. Congress has until November 21st to send a bill to the president’s desk that fixes the “widow’s tax”.
In the meantime, the “kiddie tax” issue has been apparent since the beginning of the year. Memorial Day came and went. Last month Gold Star Mother’s and Families Day came and went. Will Veterans’ Day come and go before congress fixes this? Will congress fix it at all?
For now, Malia Fry is watching and can only hope they do. And she’s scrimping and saving. “We cut things like [my son’s] new band instrument," she told me. "You don't eat out and you buy the off-brand macaroni."
