How Losing a Spouse Could Boost a Survivor's Taxes
Switching to a single filing status and a few other changes that occur after losing a spouse could mean a dramatically higher tax bite. But there are ways to ease that burden.

The death of a spouse is especially devastating if the loss also leads to financial insecurity.
And yet, I often meet couples who have spent little time thinking about what could happen if one dies years before the other.
These days, we tend to stress how long people live and the importance of having enough saved to cover what could be 30 or more years of retirement for two people. But it's also crucial to consider the income and tax consequences if one spouse is left alone.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
An income plan could change drastically, depending on whether both spouses were included in any pension-plan benefits. And the surviving spouse will receive only one payment from Social Security—whichever was the larger of the two.
A One-Two Tax Punch
But what really catches people off guard is that the income-tax table the surviving spouse uses will change as well: She'll go from married filing jointly to single status, and her standard deduction and exemptions will be reduced by half. That means more of her income will be taxable, and at higher rates. (And, yes, although either spouse could live longer, typically it is the wife who is left behind because, throughout the world, women have a longer life expectancy than men.)
And here's a 21st-century insult to add to this injury: All the money that's piled up in a couple's tax-deferred saving accounts (401(k), 403(b), traditional IRA, etc.) will be 100% taxable when it's withdrawn. So the surviving spouse likely will be adding even more to her tax burden.
An Example of What Could Happen
Let's look at an extremely simplified example with a hypothetical couple from the future: George and Jane.
George and Jane have a combined $30,000 from Social Security, and they're pulling another $30,000 from an IRA. Because they're married filing jointly, only 23% of their Social Security is subject to income tax, so George and Jane have $60,000 in income, but only $36,850 is subject to federal taxes. Their standard deduction and personal exemptions erase about $23,200, which means they have a taxable income of $13,650. They're in the 10% tax bracket, and they pay $1,365 in federal taxes.
Now, let's say poor George passes away unexpectedly, and Jane is left on her own.
Some expenses may change, but not some of the biggies—property taxes, home and auto insurance and utilities. Jane actually may spend more on food (because she's eating dinners out with friends) and travel (for frequent visits to daughter Judy).
Jane will get the higher of the couple's two Social Security payments, but it's only $20,000 per year. So to keep the same lifestyle she had when George was alive, she'll take more out of her IRA—$40,000. But here's the surprise: Now 85% of her Social Security will be subject to income tax, because the amount she'll pay is based on a different table meant for single filers. Jane will have $57,000 of taxable income, but only one exemption and half the standard deduction. Her taxable income will be $45,100—putting her in a 25% tax bracket—and she'll pay $7,046 in federal taxes, a 416% increase!
Unless she gets busy, that is.
A Life Insurance-Roth IRA Strategy
Jane can still file as married filing jointly in the year of George's death, which gives her the opportunity to make a lot of changes—including using George's life insurance to pay the taxes when she converts that old traditional IRA to a new Roth IRA. Going forward, there would be no taxes on the distributions she takes (after holding the account for five years, within the first five years of conversion, she may be taxed on the gains)—and no required distributions when she turns 70½. Jane would have much more control over her tax rates as opposed to being stuck.
All it takes is some planning. And in this strategy, George's tax-free death benefit made it possible for Jane to convert to a Roth IRA.
Like being too rich or too thin, it's hard to leave somebody too much tax-free money. In this case, Jane saved $7,046 in federal taxes during an emotional time when she really didn’t need the extra worry. And she'll continue to save on her taxes every year.
Tax-Free Assets a Key to This Plan
Often as people approach retirement, they realize they no longer need life insurance for the traditional reasons—to pay off debts or to replace income lost when the primary wage earner dies. But before you start canceling policies—or taking cash out of them—talk to your financial adviser about how you could use your insurance in a strategy to mitigate taxes.
There are only three assets that are currently tax-free—Roth IRAs, interest on municipal bonds and life insurance proceeds.
These assets could come into play when you least expect it—and when you need help the most. When you're alone and grieving, you shouldn't have to worry about losing your lifestyle to unexpected taxes.
Freelance writer Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Eric Peterson is a Registered Financial Consultant (RFC) and founder of the Peterson Financial Group. He is the author of "Preparing for the Back Nine of Life: A Boomer's Guide to Getting Retirement Ready."
-
The $33,000 Retirement: One Man's Surprising Path to Financial Freedom at 61
Forget what society tells you, even with less than $1 million, you can be happy in retirement.
-
The Best Aerospace and Defense ETFs to Buy
The best aerospace and defense ETFs can help investors capitalize on higher government defense spending or hedge against the potential of a large-scale conflict.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet Spot
Converting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on Vacation
Here are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right Now
Big portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This Instead
Yes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?
You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
As the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.