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1 1 (January 15, 2020)

handle is hein.crs/govbhwz0001 and id is 1 raw text is: ees Researh Sevice The Kiddie Tax and Military Survivors' Benefits Updated January 15, 2020 Some military families discovered that they owed higher taxes for 2018 and 2019 on distributions from their military survivors' benefits than they had in previous years. This change in tax treatment was related to temporary changes to the kiddie tax in the 2017 tax revision (P.L. 115-97). However, Congress enacted language in the Further Consolidated Appropriations Act, 2020 (P.L. 116-94) that repealed those temporary changes to the kiddie tax beginning in 2020. In addition, P.L. 116-94 enables taxpayers to retroactively elect to be taxed as if the kiddie tax changes in P.L. 115-97 did not apply in 2018 and 2019 (by filing an amended tax return). Military Survivor Benefits to Children Retired servicemembers may elect to provide their spouses and/or children with up to 55% of their pension following the member's death as part of a program called the Survivor Benefit Plan (SBP) (10 U.S.C. 1448). In 2001, as part of P.L. 107-107, Congress expanded eligibility for this benefit to dependents of servicemembers who die while in active service. The Department of Defense (DOD) distributes SBP payments as a taxable monthly annuity for the lifetime of a surviving spouse, former spouse, and/or surviving children up to age 18 or 22. Due to a dollar-for-dollar offset with another federal benefit for some surviving spouses called Dependency and Indemnity Compensation (DIC), it is often more financially beneficial for families with a member who dies on active duty to elect children as the SBP beneficiaries to avoid this offset. As of September 30, 2018, DOD reported 2,736 dependent children receiving SBP annuities as the sole beneficiary due to a parent's death in retirement and an additional 7,179 receiving an annuity due to a parent's death during active service. The amount of the SBP annuity varies and depends on the servicemember's retired pay base at the time of death. On average, a survivor receives about $1,050 per month from SBP alone (not including other benefits, such as Social Security). In Section 622 of the National Defense Authorization Act for FY2020 (NDAA; P.L. 116-92), Congress repealed the SBP-DIC offset with a three-year phaseout period. This law also repealed eligibility for spouses of members who die on active duty to transfer the SBP benefit to a child or children. Spouses who elected to transfer the SBP benefit to their children under prior law will have the ability to have this benefit transferred back to them if they continue to meet other eligibility criteria. The Congressional Congressional Research Service https://crsreports.congress.gov INI1112 CRS NStGHT Prepaimed for Mernbei-s and Committees 4 o. C- --q .. . . . . . . . ...----------------------------------------------------------------------------------------------------------------------------------------------------------------------

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