Manzanillo Sun

Tax Tips for Newly Widowed Individuals

2018 August 2018 Finances Yann Kostic

By Yann Kostic and Tom Zachystal from the August 2018 Edition

Our tax situation changes as our life stages change, and losing a spouse is no exception. You may not want to consider taxes at such a difficult time, but when you’re ready, here are some tips that will help keep your tax bill to the legal minimum:

Joint returns: First, if your spouse passed away in the current year, you can still file a joint return for the year. This may provide you with the best tax rates and the largest standard deductions, assuming you do not itemize. Regardless of when during the year your spouse died, you may also claim a full exemption for him or her.

Dependent children: In addition, if you have a child living with you and that child qualifies as your dependent, for the first two years after your spouse’s death you may file as a so-called qualifying widow or widower a filing status that provides you with the benefit of joint return tax rates.

However, you will not receive an exemption for your late spouse. In the third year after your spouse’s death, if you have a child living with you and that child qualifies as your dependent, you can claim head-of-household status on your tax return. The advantage of doing so is that tax rates are better than they are for single taxpayers (although they are less favorable than they are for joint returns and qualifying widow and widower returns.)

Life insurance: Finally, remember that any proceeds you receive from a life insurance policy are tax-free (regardless of who paid the premiums); you should not report those proceeds as income.

You also may get breaks in other areas, such as individual retirement accounts and rental property inherited from a spouse. Your financial advisor can clarify.

It goes without saying that no suggestions can ever begin to compensate for the loss of your spouse, but they may make your life easier during this trying time.

Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.

Yann Kostic, MBA and Tom Zachystal, CFP, are Presidents of their respective As-sets Management firms, both US-Registered Investment Advisors (RIA). Tom is the San Francisco Financial Planners’ Association President. Tom and Yann cater to US expats in Mexico and worldwide. Comments, questions or to request his newsletter, “News you can use” contact him at, in the US at (321) 574-1 529 or in Mexico, (376) 106-1613.

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