In simple terms, the widow's penalty refers to a situation where a surviving spouse may experience a reduction in their overall income or financial benefits, but an increase in taxes, after their partner passes away.
After a spouse dies, the survivor often ends up paying higher taxes on less income — something known by accountants and financial planners as the “widow's penalty,” because women typically outlive their husbands.
Couples can help reduce the survivor's penalty by adding tax-free sources of income, financial planners say. Life insurance — which can provide tax-free proceeds to the survivor — is one option, but buying a sufficiently large policy may not be affordable for older people, O'Neill notes.
Filing a Married Filing Separately Return
This still may be the best choice for you depending how much income your spouse earned before he died (assuming he had earned income the year of his death). But if he died early in the year, filing a Married Joint Return may now be to your advantage.
For the two years following the year of death, the surviving spouse may be able to use the Qualifying Widow(er) filing status. To qualify, the taxpayer must: Be entitled to file a joint return for the year the spouse died, regardless of whether the taxpayer actually filed a joint return that year.
The qualifying widow(er) standard deduction is the same as married filing jointly. Although there are no additional tax breaks for widows, using the qualifying widow status means your standard deduction will be double the single status amount.
For the 2020 tax year, qualifying widow(er)s are required to file a federal income tax return if they are: Younger than 65 with a gross income of at least $24,800. 65 years or older with a gross income of at least $26,100.
You can file taxes as a qualified widow(er) for the year your spouse died, as well as two years following their death. So, depending on the timing of when the spouse passed during the year, this time frame could technically be three calendar years.
The tax breaks offered to qualify widow(er)s include a lower tax rate, a higher standard deduction, and some potentially beneficial tax treatment in regard to some investments.
Filing Status After Qualifying Widow(er)
You can only file as a Qualifying Surviving Spouse for the two years after the year in which your spouse died. For example: If your spouse died in 2022, you may only qualify as a Qualifying Surviving Spouse for 2023 and 2024 if you meet the other requirements.
Social Security survivors benefits are paid to widows, widowers, and dependents of eligible workers. This benefit is particularly important for young families with children.
Surviving spouse, full retirement age or older — 100% of the deceased worker's benefit amount. Surviving spouse, age 60 — through full retirement age — 71½ to 99% of the deceased worker's basic amount. Surviving spouse with a disability aged 50 through 59 — 71½%.
A widow(er) is eligible to receive benefits if she or he is at least age 60. If a widow(er) remarries before age 60, she or he forfeits the benefit and, therefore, faces a marriage penalty. Under current law, there is no penalty if the remarriage occurs at 60 years of age or later.
While most states don't void a marriage after one of the people in the marriage dies, since the need for the annulment would be based on hearsay of the surviving spouse or third parties, an annulment can take place if the marriage was illegal and therefore invalid when it took place.
The standard deduction amounts for 2023 are: $27,700 – Married Filing Jointly or Qualifying Surviving Spouse (increase of $1,800) $20,800 – Head of Household (increase of $1,400) $13,850 – Single or Married Filing Separately (increase of $900)
Your widow or widower can get reduced benefits as early as age 60. If your surviving spouse has a disability, benefits can begin as early as age 50. For more information on widows, widowers, and other survivors, visit www.ssa.gov/survivorplan.
While individuals cannot deduct funeral expenses, eligible estates may be able to claim a deduction if the estate paid these costs. However, if your estate is below the $12,060,000 federal estate tax exemption limit (2022 tax year), you cannot use this deduction.
Up to 85% of a taxpayer's benefits may be taxable if they are: Filing single, head of household or qualifying widow or widower with more than $34,000 income. Married filing jointly with more than $44,000 income. Married filing separately and lived apart from their spouse for all of 2021 with more than $34,000 income.
If you file a return and claim a refund for a deceased taxpayer, you must be: A surviving spouse/RDP. A surviving relative. The sole beneficiary.
The term “married” encompasses all married people, including those separated from their spouses. “Unmarried” includes those who are single (never married), divorced, or widowed.
No. Your relationship to the family ended with your spouse's death. You ARE still legally related to your spouse.
Qualifying widow or widower
Surviving spouses with dependent children may be able to file as a Qualifying Widow(er) for two years after their spouse's death. This filing status allows them to use joint return tax rates and the highest standard deduction amount if they don't itemize deductions.
If the deceased person did not file individual income tax returns for the years before their death, their surviving spouse or representative may have to file prior year returns. The IRS considers the surviving spouse married for the full year their spouse died if they don't remarry during that year.
The minimum income amount depends on your filing status and age. In 2023, for example, the minimum for Single filing status if under age 65 is $13,850. If your income is below that threshold, you generally do not need to file a federal tax return.