Filing taxes after death of a spouse.
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Video Transcript:

After your husband or wife dies, you will be dealing with a major financial change on top of a major life change. Filing your spouse’s final tax return may be especially stressful because you don’t know what you don’t know. You may have been in the married-filing-joint status for decades, so now what do you do?

Here’s the good news. You can still file taxes with your married-filing-joint status for the year your spouse dies. Then, for two years after that, there is a special filing status called “qualifying widow” that, in essence, preserves your married-filing-joint tax brackets. After that, you’ll file according to your current marital status.

Now, that doesn’t mean that your tax situation will be the same. With any major life event, there are financial considerations and opportunities, especially in the area of tax planning. When my clients lose a spouse, I look through their tax returns and determine what, if anything, will change. We look at what the future tax implications might be once their tax brackets change to single, so we can help plan ahead and make adjustments over the next two years if we can. Truly effective tax planning is a multi-year endeavor – not something you do once a year in the spring.

One specific opportunity you may not be aware of can help widowed homeowners save significantly on taxes. If your home has increased in value since you bought it, you have two years after the death of your spouse to double-dip on tax savings. Not only is the cost basis stepped up on the deceased spouse’s half, the $500,000 capital gain exclusion for married couples remains in place for that time period.* So if you are thinking of maybe selling your home, there is a time issue in play.

That said, “Don’t let the tax tail wag the dog.” There’s no need to make any decisions suddenly. You are grieving, and you need to give yourself time to process the loss. There are no immediate deadlines to be concerned about: so, take your time. And when you’re ready, seek the wise counsel of a trusted advisor to be a sounding board for any financial decisions you’re considering.

I’m Joel and I am a Financial Advisor with Savant Wealth Management.


Author Joel Cundick Financial Advisor / Team Lead

Joel is frequently quoted in local and national media and has been a repeat guest on Federal News Radio. He teaches retirement preparation seminars to Federal employees through the National Institute of Transition Planning.

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