Senate unanimously passes bill regarding taxes on Gold Star families

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WASHINGTON (CBS19 NEWS) -- The U.S. Senate has unanimously approved a bill to fix a mistake in tax law that has been hurting the families of fallen service members.

Senators Tim Kaine and Mark Warner applauded the Senate's passage of the bill to help Gold Star families.

The bill will provide tax relief to the children of military members who have been killed in service to the country.

It corrects an error in the Tax Cuts and Jobs Act of 2017 that treats military and VA survivor benefits as trusts or estates, which subjects them to a higher tax rate.

The new bill would treat such survivor benefits as earned income instead.

“Gold Star families deserve our sympathy and gratitude, now an unfair tax increase thanks to a Congressional screwup,” said Kaine and Warner. “We're glad the Senate has decided to fix this mistake, and we hope the house will take action swiftly to ensure that Gold Star families aren't hit with a tax hike.”

Current law allows spouses of deceased service members are eligible to get two survivor benefits, but they cannot receive both simultaneously in full, so many spouses will sign the Department of Defense Survivor Benefits Plan over to their children.

Before the 2017 law, children who received this benefit were taxed at the parent's rate. Under the 2017 law, survivor benefits going to children were treated as a trust or estate, and that can be taxed up to 37 percent.

Previously, Gold Star families had paid an average of 12 to 15 percent in taxes on this survivor benefit.

The Gold Star Family Tax Relief Act would also be a retroactive bill, and it would refund Gold Star families who were taxed at the higher rate going back to Dec. 31, 2017.

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