Are Death Benefits Taxable?

Federal Tax Exemption for Line-of-Duty Death Annuities

Now all survivors who receive an annuity on account of the death of a public safety officer killed in the line of duty can exclude these benefits from gross income on their tax returns.

In June 2001, President Bush signed the Fallen Hero Survivor Benefits Act of 2001. This law amended the IRS code to exempt pensions or annuity payments on public safety death benefits.

The 2001 law, P.L. 107-15, corrected an inequity in the tax code that had covered only survivors whose loved one died after December 31, 1996. It extended the benefit to include survivors whose loved one died on or before December 31, 1996. However, only amounts received after December 31, 2001 qualify for exemption.

Survivors whose loved one died in the line of duty after December 31, 1996, received this exemption under P.L. 105-34.