News & Trending Tax News

5 Ways To Avoid the ‘Widow’s Penalty' Tax After Losing a Spouse

You may be able to find other options to better your tax situation during this difficult time.

woman with lily flowers besides coffin
Updated Nov. 14, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Losing a spouse can be one of the most devastating experiences a person goes through. The financial burden that comes along with that loss can also be devastating in different ways and may change your financial obligations when tax time rolls around.

This change is often called the “Widow’s Penalty,” which can significantly increase your tax burden when your filing status changes after the death of your spouse. This can move you from the 24% tax bracket you likely used when completing your taxes married filing jointly to 35% when filing as single.

Here are some tips that may help minimize the financial impact, stretch your retirement dollars further, and lower your financial stress as you work through your significant loss.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today”
  • Create your account (important!) by answering a few simple questions
  • Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

Use another qualifying filing status

pkstock/Adobe 1040 us individual income tax return form

Let’s begin by talking about taxes and some of the things you may be able to expect. If you lose your spouse, you may be able to use “qualifying widow(er)” as your status for up to two years.

You may want to use this time to look at your own IRA and your spouse’s IRA and to figure out the best options for your financial future.

Whether the tax breaks during this time will be better than filing single can depend on your unique personal situation, and a tax professional may be able to help you decide the best course of action moving forward.

Consider diversifying investments

Angelov/Adobe strategy of diversified investment chart on tablet

There are tax-efficient investment options that may help lower that end-of-year tax burden. Some examples are tax-managed funds and index funds. You may want to see about diversifying your investments to include these or other tax-efficient options.

You might also consider spreading out any distributions from retirement accounts over a longer period of time to keep yourself in a lower tax bracket. Diversification is often seen as a strength of portfolios and this time may be an opportunity for you to look into the options that best suit your needs now and into the future.

You may also want to check with your portfolio manager about something called a step-up in basis. This can provide a tax break on assets such as stocks and mutual funds.

Get charitable throughout the year

seanlockephotography/Adobe taxes receipt Charitable Deduction Section

Donor-advised funds and qualified charitable distributions can help offset taxes and become a way to honor a spouse that has passed, especially if they wanted a portion of their estate to be used as a donation to a cause near and dear to their heart.

You may be able to work with a financial advisor to look into tax-efficient charitable giving strategies.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.1

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

Ask to have your IRMAA lowered

nimito/Adobe female sales manager talking to male client

If you’re on Medicare, watch out for rising premiums due to a surcharge. Those collecting Medicare will be subject to a change in their Income-Related Monthly Adjustment Amounts (IRMAA), which will change when they begin filing single.

A widow(er) can ask to have those IRMAAs lowered after the loss of their spouse. You may also want to look into other options with your healthcare and medical needs that could be impacted by the loss of your spouse. It may be worth it to check into any free or community resources available to you.

Advanced planning

Kay Abrahams/peopleimages.com/Adobe senior couple consulting finance advisor

If you have an opportunity to meet with an advisor before your spouse's death, they may be able to help you make some changes ahead of time that will lower your tax burden, like investing in a partial Roth IRA conversion.

You may also want to look at health savings account options. Additionally, if you begin looking for help early in the tax year, that’s more time to prepare for the changes that come along at tax time.

A tax professional can also help you navigate the complexities of the different laws and deductions that may impact your situation.

Bottom line

Ashley Whitworth/Adobe woman mourning at cemetery in fall

Losing a spouse can be one of the most difficult events you face in life. Adding to the emotional toll can be lots of financial decisions to make and the stress of making changes to better your financial situation.

You can help prepare yourself financially by looking at your tax filing status and investment options. You may want to bring on a financial advisor or tax expert soon to help you navigate many of the complexities that could impact you and the investments you shared with your spouse.

Lucrative, Flat-Rate Cash Rewards

5.0
info

Wells Fargo Active Cash® Card

Current Offer

$200 cash rewards bonus after spending $500 in purchases in the first 3 months

Annual Fee

$0

Rewards Rate

Earn unlimited 2% cash rewards on purchases

Benefits and Drawbacks
Card Details


Author Details

Chris Adam

Chris Adam is a seasoned personal finance, technology, and general assignment journalist. As a broadcast and digital journalist, he's served as a leader in network and local newsrooms. Some of his favorite topics to write about include investing, shopping, retail, and stocks.