After the loss of a spouse or partner, the surviving spouse faces many challenges. And although the most important ones to overcome are usually emotional and psychological, financial challenges must also be dealt with. And one of these is tax planning and preparation.
To help you reduce your tax burden in the immediate aftermath of your spouse's passing, here's what every survivor needs to know about their tax filing status this year and moving forward.
1. Married Filing Jointly
The first hurdle is filing taxes in the year in which your spouse passed away. The IRS and most states allow the surviving spouse to continue to file jointly as a married couple for the entire year, no matter when one partner died. This provides the largest amounts of deductions and credits no matter how much or how little income they earned that year.
2. Married Filing Separately
It may seem somewhat callous after death, but you may also choose to use the filing status of 'married, filing separately.' This status separates your income and deductions from your spouse's income and deductions. It's not particularly beneficial in many cases, but it does reduce some survivors' tax bills or increase their refunds. The estate executor may need to sign your spouse's return.
3. Qualifying Widow(er)
What happens after the current year? The IRS offers a special tax filing status to qualifying widows and widowers. The qualifying widow(er) status mirrors the deductions allowed when filing jointly as a couple, so it provides a significant tax reduction. Unmarried widows and widowers who have qualifying dependent children may use this status for a further two years.
4. Head of Household
If you cannot use the qualifying widow(er) filing status — and once the first two years have passed — qualifying parents may then begin using head of household status. This tool gives you additional tax reductions that fall somewhere between joint filing and single filing.
Finally, you will likely then revert to filing income taxes as a single individual, assuming you have not remarried. The change to single filing status can be jarring for surviving spouses because their tax bill is likely to go up. Therefore, advance planning for this change is vital to avoid unwanted surprises.
Where to Start
Does all this sound confusing? That's okay. A professional tax preparer can help you with both current tax reporting and future tax planning. Meet with a tax preparation service in your state today to get started.Share