Taxes, Later On: Part 12b of Financial Considerations When You Lose Your Spouse


Routine can be so comforting. Even when it bores us, repetition offers reassurance. The loss of a spouse destroys “normal” and requires the creation of new behaviors. Small decisions, like if you should eat or save the second Reese’s cup that he used to eat. Big ones, like what to spend and where to live. After you are widowed, your tax situation is also little different. In our series on how to manage finances after the death of a spouse, we’re exploring tips from FINRA, a reliable financial source. Today, Tip 12b: Taxes, Later On – how does your tax situation change after the death of a spouse?


Qualifying Widow Tax Status

For two years after your spouse dies, assuming you don’t remarry, you can use a special tax filing status called “Qualifying Widow” that allows you to use the higher standard deduction of Married Filing Jointly ($24,400 in 2019) rather than the lower Single deduction ($12,200 in 2019). What that means in plain, simple language is that you get to subtract more – twice as much – off your taxable income. Very simply, if you earned $60,000 in 2019 and you file as Single, your taxable income gets reduced from $60,000 to $47,800 by subtracting that standard deduction. When you were married, which includes the year your spouse died, you subtracted a higher standard deduction for Married couples Filing Jointly, or $60,000 - $24,400 or $35,600 (simplified) of taxable income.


If your spouse has died in 2019, you use that higher amount $24,400 in 2019 and then for the next two years you can use the Qualifying Widow deduction, which is the same higher “Married” amount. The amounts of the standard deduction increase slightly some years (it will be $24,800 in 2020), and you are allowed to use that amount for the first two years of widowhood if you don’t remarry. It is a very helpful tax break.


Remarriage

The pain of loss is strong right now, but at some point, you might meet someone special who you want to marry. One purely financial consideration about the timing of that decision is the effect it could have on your