The death of a loved one is never easy. During this period of grief, the surviving spouse is likely not thinking about their taxes. Perhaps, they should. Tax experts say that the surviving spouse will likely experience dramatic changes to their taxes.
As part of TheStreet’s ongoing tax series, we caught up with Jeffrey Levine, CPA and tax pro from Buckingham Strategic Wealth Partners. He spoke to our Retirement Daily’s Robert Powell about the top tax strategies for the recently widowed.
3 Tax Tips for Those Recently WidowedJoint tax brackets are much bigger than single filer brackets. The survivor might have a higher tax bill in the future because they’re using less favorable tax brackets.All of the tax attributes of the decedent die with the individual and don’t survive on the joint return. So use it in the final year to the extent possible. (Note: The year death occurs is the final year a joint tax return can be filed.)It’s always best to set yourself up for future success. Organize your documents, and reach out to a good tax professional or financial advisor to help make sure you’re not overlooking anything.TurboTax Live experts look out for you. Expert help your way: get help as you go, or hand your taxes off. You can talk live to tax experts online for unlimited answers and advice OR, have a dedicated tax expert do your taxes for you, so you can be confident in your tax return. Enjoy up to an additional $20 off when you get started with TurboTax Live.
Quotes| Top Tax Tips for Those Recently Widowed Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth Jeffrey Levine, Chief Planning Officer, Buckingham Strategic WealthVideo Transcript| Jeffrey Levine, CPA and Tax Expert, Buckingham Strategic WealthRobert Powell: You’re recently widowed, what do you need to know about your taxes? Well, here to talk taxes with me is Jeffrey Levine from Buckingham Wealth Partners. Jeffrey, what do those who are recently widowed need to know about their taxes?
Jeffrey Levine: Well, unfortunately, during such a chaotic time and sad time for folks, they’re not usually thinking about taxes. And yet when a death occurs, the surviving spouse oftentimes experiences dramatic changes in their taxes. The year death occurs is the final year a joint tax return can be filed. And so there are a couple of things to know there. First off, the joint brackets are much bigger than, let’s say, the single filer brackets. And so that might mean that the survivor might have a higher tax bill in the future because they’re using less favorable brackets.
The other thing to keep in mind is that all the attributes of the decedent, the tax attributes that they have, kind of die with them, so to speak. So if they had a capital loss carry forward or AMT credit carryforward, those things die with the individual who, let’s say, owned them, if you will. And even though they were reported on a joint return in the past, they don’t survive on the joint return. So it’s a ‘use it or ‘lose it’ situation. And of course, the answer there is to use it to the extent possible.
And finally, it’s always best to set yourself up for future success. Again, this is a time of significant change. Oftentimes, one spouse handles the finances a lot more than the other spouse, and so that survivor wants to make sure they’re doing whatever they need to get themselves organized and in a place where they can manage this themselves going forward. So reaching out to a good tax professional or financial advisor is a great thing to do whenever there is a significant change because they can help you work through it and make sure you’re not overlooking anything that might be critically important.
More Tax Advice From Our Partners at TurboTax.com:
Death in the FamilyTax Implications for Taxpayers Who Have Lost a SpouseReal Talk Series: I Am Recently Widowed. How Will This Affect My Taxes?Editor’s Note: The content was reviewed for tax accuracy by a TurboTax CPA expert.
Zach Faulds contributed to the writing of this article and produced the video and/or the graphics associated with it.