Blog

Repeal the Widow's Tax

Washington, D.C., September 18, 2019

It's called the “Widows Tax” and it sends an awful message to our military families. I want to see this permanently repealed.

The details aren’t too complicated, so stick with me on this. For background information, there are two (2) separate programs that provide payouts to military families upon the death of a servicemember or veteran.

➡ First is the Dependency and Indemnity Compensation (DIC) program. For any troop or veteran who dies of a cause related to their military service, the DIC program provides his/her family with a $15,000 annual benefit. Think of it like a small life insurance policy, except there is no cost to the servicemember.

➡ Separately, there’s an optional program called the Survivor Benefit Plan (SBP). It’s essentially an annuity, where servicemembers can choose to contribute part of their retirement into the SBP program. Then, upon their death, their family member(s) can receive up to 55% of their retirement pay.

The problem is that families who qualify for both programs are subject to an offset, where their SBP payments are reduced by the amount of their DIC benefits. For example, let’s say a servicemember has been contributing part of his retirement to a Survivor Benefit Plan for his family, and then loses his life while serving our nation. His family would be eligible to receive the DIC benefit of $15,000 annually, only to then have payments from his Survivor Benefit Plan – which he paid into – reduced by the same amount as the DIC benefit. That’s why it’s aptly named the “Widow’s Tax.”

It’s no different than saying to our troops, “If you want to use the Survivor Benefit Plan to take care of your family after you’re gone, we’re going to punish them financially if you happen to die from a service-related injury.” This is unacceptable.

Congress passed a partial solution to this a couple of years ago, with a stipend to “offset the offset”, but it’s time for permanent fix to this issue. I’m (cautiously) optimistic we’ll see a repeal of the Widow’s Tax soon, and was happy to co-sign a letter to the House Armed Services Committee asking them to make sure its repeal is a priority as they deliberate the next National Defense Authorization Act.