Understanding Tax Concerns when You Lose Your Spouse

The death of a spouse may be the greatest tragedy of your life, but sadly, it can happen. While you may not want to think about the possibility, doing so in advance can help you be prepared from a tax perspective. Here are some tips, whether you need them now or store them away for later.

File a joint return in the first year. Chances are when you were married you used the “married filing jointly” tax status. If your spouse passed away in the current year, you may still file a joint return for that year. This could provide you with the best tax rates and the largest standard deductions.

File a “qualifying widow or widower” return in the second and third years. You may file using a tax status called “qualifying widow or widower” for two years after your spouse passes away. This gives you the benefits of a joint filing. However, there is one caveat: you must have a child who is a dependent in order to file as a qualifying widow or widower.

File as “head of household” after the third year. Lastly, after those benefits expire, you may want to claim head of household status on your tax return. You can do so if you have a child who qualifies as a dependent. Tax rates are better than they are for single taxpayers (although they are less favorable than they are for “married filing jointly” and “qualifying widow or widower” returns).

This is a difficult topic. We cannot emphasize enough: the death of a spouse is a tragedy no one wants to contemplate. Certainly, it is not a time when you want to think about finances.

If you have any questions about how any of this works, please reach out. We’re just a call or email away.