This bill — the Gold Star Family Tax Relief Act — would treat military survivor benefits that are received by children as earned income for the purposes of the “kiddie tax” (the tax on the unearned income of children). In effect, this would exempt military survivor benefits from the tax. The exemption would apply retroactively for the 2018 tax year and for all years thereafter.
The need for this bill arose after a change made by the 2017 Tax Cuts and Jobs Act to the application of the tax to prevent the sheltering of income by wealthy parents had the unintended consequence of raising taxes on military survivor benefits.