Daily Tax Report ®

Bill Would Fix Tax Law Error Hitting Military Families

May 2, 2019, 5:48 PM

House lawmakers released a bipartisan bill to correct an error in the tax code that has some military families paying more tax on certain survivor benefits.

Families are now paying a 37 percent tax rate on benefits for children of deceased service members. The benefits used to be taxed at 12 to 15 percent, according to a letter Sen. Amy Klobuchar (D-Minn.) wrote to Treasury Secretary Steven Mnuchin.

The bill would consider the benefits to be part of the children’s earned income.

  • The bill’s lead sponsor is Elaine Luria (D-Va.). Luria, a 20-year Navy veteran, is on the House Committee on Veterans’ Affairs and the House Committee on Armed Services.
  • Rep. Kenny Marchant (R-Texas), a co-sponsor, said he hopes the bill could be passed the week of May 6, or the week after.
  • The error had also been included in former committee chairman David Camp’s (R-Mich.) tax overhaul proposal, Marchant said. “It’s been in writing a long time, but apparently nobody realized the consequence it would have,” he said.
  • Democrats have generally been reluctant to make changes to errors in the Republican-led tax law.

To contact the reporters on this story: Kaustuv Basu in Washington at kbasu@bloombergtax.com; Robert Lee in Washington at rlee@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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