Tax Tips for Newly Widowed Individuals

Our tax situation changes as our life stages change, and losing a spouse is no exception. You may not want to consider taxes at such a difficult time, but when you’re ready, here are some tips that will help keep your tax bill to the legal minimum:

Joint returns: First, if your spouse passed away in the current year, you can still file a joint return for the year. This may provide you with the best tax rates and the largest standard deductions, assuming you do not itemize. Regardless of when during the year your spouse died, you may also claim a full exemption for him or her.

Dependent children: In addition, if you have a child living with you and that child qualifies as your dependent, for the first two years after your spouse’s death you may file as a so-called qualifying widow or widower – a filing status that provides you with the benefit of joint – return tax rates.

However, you will not receive an exemption for your late spouse. In the third year after your spouse’s death, if you have a child living with you and that child qualifies as your dependent, you can claim head-of-household status on your tax return. The advantage of doing so is that tax rates are better than they are for single taxpayers (although they are less favorable than they are for joint returns and qualifying widow and widower returns.)

Life insurance: Finally, remember that any proceeds you receive from a life insurance policy are tax-free (regardless of who paid the premiums); you should not report those proceeds as income.

You also may get breaks in other areas, such as individual retirement accounts and rental property inherited from a spouse. Your financial advisor can clarify.

Of course, these suggestions won’t compensate for the loss of your spouse, but they may make your life easier during this time.

Note: This material has been prepared for informational purposes only and is not intended to provide tax advice.