Widow’s Tax Eliminated: What Surviving Military Spouses Need to Know

As of February 1, 2023, surviving spouses receiving both the Survivor Benefit Plan (SBP) from the Defense Finance and Accounting Service (DFAS) and Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs (VA) now receive full payments from both programs. This significant change comes as the SBP-DIC offset — commonly known as the “Widow’s Tax” — has been fully eliminated, marking a historic victory for military survivors and their advocates.

What Was the “Widow’s Tax”?

The “Widow’s Tax” referred to the longstanding policy that required a reduction in SBP payments for surviving spouses who also received DIC, based on a federal rule against “double-dipping.” The rationale was that survivors should not receive two benefits for the same cause. However, survivors and advocates long argued that this was a misinterpretation: SBP and DIC serve different purposes and are funded differently.

• SBP is a retirement-based election made by the service member, who pays monthly premiums to ensure continued income for their surviving spouse.
• DIC is a VA entitlement provided to the spouse of a veteran who died on active duty or from service-related causes.

For years, affected survivors also received a monthly Special Survivor Indemnity Allowance (SSIA) to partially compensate for the offset. In practice, this still resulted in many families receiving less than what the service member had intended.

Legislative Victory: Repeal of the Offset

After tireless advocacy, Congress responded. The 2020 National Defense Authorization Act (NDAA) included a provision to repeal the SBP-DIC offset. The law implemented a three-year phase-out:

• 2021: SBP was reduced by two-thirds of the DIC amount.
• 2022: SBP was reduced by one-third of the DIC amount.
• 2023: The offset was fully eliminated.

Now, eligible surviving spouses receive the full amount of both SBP and DIC, and the SSIA — previously used to bridge the gap — is no longer necessary and will no longer be paid.

What Survivors Should Know

• No Action Required: The increase in payments is automatic for eligible surviving spouses. No application or paperwork is necessary.
• Eligibility: Only surviving spouses receiving both SBP and DIC due to the death of the same veteran will see this change reflected in their payments.
• DFAS Support: For additional help or questions about the SBP-DIC offset and other survivor benefits, survivors can refer to the DFAS Survivor Newsletter or contact DFAS directly at 800-321-1080.

The repeal of the “Widow’s Tax” is more than just a policy update — it’s a long-overdue recognition of the sacrifices made by military families. Thanks to the determined efforts of survivors and their advocates, affected spouses now receive the full financial support intended by both the Department of Defense and the Department of Veterans Affairs.

For more information or personalized assistance, contact Member Benefits at [email protected] or by calling 703-707-1182.

This article was originally published February 22, 2023.