Military Survivor Benefits
While military deaths are somewhat common, they are a tragedy non-the-less. However tragic this may be to their survivors, it's important to realize that there are many tax benefits available that can help these survivors deal with the issues that follow the loss.
The Internal Revenue Service (IRS), Social Security Administration, Department of Defense, and the Department of Veterans Affairs, all offer some sort of military survivor benefits to help with the effects of loosing a loved one. While some of these benefits involve income tax support, others are designed to help the survivors move forward with everyday life. General guidelines to common benefits and what affect they may have on your taxes are addressed below, However, you should check with each agency for up-to-date benefit requirements and availability.
Understanding Military Survivor Tax Benefits
When a military death occurs in a combat zone for various reasons, including from injury or disease, tax forgiveness may be sought from the Internal Revenue Service. This tax forgiveness applies to any member of the U.S. Armed Forces that dies while deployed on active duty in a combat zone. In certain circumstances, tax forgiveness also applies to Armed Force members serving outside of combat zones.
The IRS forgives a deceased soldier's income tax liability in full for the tax year that the soldiers death occurred. Therefore, the soldiers income tax for that year does NOT have to be paid, and if it was already paid, it will be refunded by the IRS.
Any tax liability for a fallen soldiers that may be owed at the time of their death is forgiven, and any taxes that were paid after the date of death will be refunded. Note that when filing a joint tax return, only the service member's portion of any joint tax liability is forgiven.
Fortunately, Military Tax Software like TurboTax can be one of the best tools you can use to help you find and keep track of tax deductions available to you as a military survivor. As confusing as the tax codes are, there is no doubt that a good tax software program can be a dependable guide that insures you the ability to take advantage of every tax benefit available for your tax filing circumstances.
Taking advantage of these benefits include the need to be aware of different agencies that provide a wide range of services and financial assistance whenever a soldier dies while on active combat duty.
Military Of Defense Survivor Tax Benefits
One of the most immediate and helpful forms of assistance is a non-taxable $100,000 one-time, death gratuity that the Department of Defense offers survivors to help with current expenses for support during the readjustment period for survivors.
The Department of Defense also administers the Uniformed Services Survivor Benefit Plan. The Survivor Benefit Plan pays the surviving spouse more than 50% of what the deceased service member's retirement would have been if they had retired on 100% disability based on their time of death. These payments, are adjusted for inflation annually and are subject to income tax.
Survivors are also allowed to continue living in government housing for up to one year, or they may choose to receive a lump-sum payment for housing their needs instead. Relocation cost compensation is also available for survivors to use within one year from the service members death. Relocation and housing benefits are not subject to income taxes.
Department of Veterans Affairs
Survivor Tax Benefits
This is a monthly disbursement based on a flat-rate that is adjusted for inflation on an annual basis. An additional monthly disbursement for each of the surviving spouses dependent children and an additional transitional assistance of $250 each month is available for those who qualify. The Dependency and Indemnity Compensation payment and transitional assistance payments are not subjected to income taxes.
Social Security Administration
Survivor Tax Benefits
Surviving spouses and dependants may also qualify for additional Social Security Administration tax benefits.
Up to 85% of Social Security benefits may be taxable depending on the survivor's total annual income. The amount that is taxable is generally determined by the surviving recipients total income. Benefits received by dependent children in many occasions are subject to taxes only if the dependant has another source of income. Special care should be taken when determining how much of any Social Security benefits received will become taxable.
While the assistance a survivor receives is not taxed or only partially taxed, any investment earnings from these benefits are taxable.
Military Retirement Pay "Survivor Benefit Plan"
The Survivor Benefit Plan (SBP) helps make up for the loss of income after a military retiree dies and their retirement pay stops. The survivor benefit plan is in sense an insurance policy that pays a diseased military retirees eligible survivors an inflation-adjusted monthly income.
When a military retiree dies their retirement pay ends, and the surviving spouse may be left with an insufficient income source. Military retirees should give serious thought to how they can protect their spouse from hardships caused by the loss of military retirement pay. Basic SBP pays a benefit equal to 55 percent of your retired pay to a surviving spouse.
SBP coverage can be purchased by paying premiums once you retire. These premiums can be taken by reducing your retirement pay so that it does not count as income. Eligible children can also be SBP beneficiaries as well, either by themselves, or added to a spouses coverage.
Military retirees that have no current spouse or children to cover, may be able to select an "insurable interest" to cover (such as, a former spouse, business partner, or parent) for SBP coverage.