Home sale tax advantageA home is a major acquisition, regardless of marital status. But when a married couple sells their residence, they get a tax break that is twice as large as that available to single home sellers. By living in the property for at least two of the five years before selling, a couple can exclude from tax up to $500,000 in sale profits versus $250,000 for single sellers.
The larger home sale exclusion remains even after a spouse passes away. As long as the surviving spouse remains unmarried and sells the couple's home within two years of the day his or her spouse died, the widow or widower can claim the $500,000 joint gain exclusion.
Estate tax advantagesEstate taxes are a concern for all filers, but the good news is that the Internal Revenue Code exempts millions of dollars of assets from this tax. The better news for married couples is that they don't have to worry about limits. You can leave an estate worth any amount to your spouse and, thanks to what is known as the estate tax marital deduction, there are no federal estate taxes to pay.
Estate assets left to a spouse aren't tax-free. Rather, potential taxes are deferred. But the estate tax marital deduction gives the surviving spouse time to make other tax moves to ease taxes on the eventual distribution of the assets to heirs.
Surviving spouse filing statusAfter the loss of a spouse, you'll need to sort through filing status issues. If you remain unmarried in the year that your husband or wife died, you can file your tax return jointly, taking into account your deceased spouse's income. This allows you to take advantage of the larger standard deduction and potential credit claims. If you do remarry within that tax year, in addition to filing your joint (or married filing separately) return with your new spouse, be sure to file your deceased spouse's tax return.
If you have dependent children and remain unmarried, the next tax year you should file as a qualifying widow or widower. You can use this filing status for the two tax years following the year your spouse passed away. It gives you the benefit of joint filing tax tables and a larger standard deduction.
Contact the Social Security AdministrationFinally, women who take their husbands' names need to let the Social Security Administration know of the change. Your Social Security number is key to your tax filings. If you do not reconcile your new name and tax ID number, your return could be rejected because of the mismatch. You also could have credits or deductions disallowed or face delayed receipt of your refund.