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Military Life

Repealing the Widow’s Tax: Important Changes You Need to Know


Effective 1 January 2023, surviving spouses receiving both the Survivor Benefit Annuity (SBP) from Defense Finance and Accounting (DFAS) and Dependent and Indemnity Compensation (DIC) from the Department of Veterans Affairs (VA), now receive their full payments from DFAS and the VA, starting with the 1 February 2023 deposit. This is due to the SBP and DIC offset being fully eliminated. As a result, the Special Survivor Indemnity Allowance (SSIA) will no longer be paid.

In December 2019, the 2020 National Defense Authorization Act (NDAA) voted to repeal the law commonly known as the “Widow’s Tax,” which requires an offset of Survivor Benefit Plan (SBP) payments for surviving spouses who are also entitled to Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs (VA).

The original law stated that a surviving spouse who receives DIC is subject to a reduction of SBP payments, resulting in an SBP offset. With the NDAA’s repeal of the “Widow’s Tax,” this offset will be phased-out in three steps, beginning with a partial reduction in January 2021 and ending with a total elimination of the offset in January 2023.

Here’s what you need to know about the repeal of the “Widow’s Tax”:

  • There will be no changes to the SBP-DIC offset in 2020.
  • In 2021, SBP will be reduced by two-thirds of the amount of DIC.
  • In 2022, SBP will be reduced by one-third of the amount of DIC.
  • In 2023, the offset will be fully eliminated.
  • The increase in benefits will occur automatically for all surviving spouses subject to the SBP-DIC offset. You do not need to take any actions to initiate the offset.
  • Eligible survivors will continue to receive Special Survivor Indemnity Allowance (SSIA), currently $323 per month for 2020, up to the current SSIA amount or the amount of SBP that is offset due to DIC, whichever is less. However, SSIA will no longer be paid once the offset is fully eliminated in 2023.

More information about the elimination of the offset is available through the official DFAS SBP-DIC Offset Phased Elimination News page, or contact AAFMAA Member Benefits at [email protected] or 703-707-1182.

This article was originally published June 10, 2020.

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