What Is a Widow(er)'s Exemption?

A ꦍwidow(er)’s exemption refers to a reduction of tax burdens on a tꦏaxpayer following the death of a spouse.

State laws vary but generally allow for a reduction in taxes 🎉for a surviving spouse for a certain period. This can help survivors and their dependents financially after a death that may cause internal economic turmoil in a househol🍌d.

At the federal level, widows and widowers receiv🐠e tax relief from estate and inheritance windfalls.

Understanding Widow(er)'s Exemptions

The surviving spouse exemption refers to a tax deduction available to a recently widowed spouse. This type of be🥃nefit is available to a surviving spouse regardless of gender.

State Exemption

State tax relief varies from state to state but most commonly involves a reduction in 澳洲幸运5官方开奖结果体彩网:property tax for the surviving spouse.

A common form of a state widow(💛er)’s exemption is the type offered in Florida. The state allows for a $5,000 reduction in the tax basis on which property taxes are based.

This is not a $5,000 澳洲幸运5官方开奖结果体彩网:tax credit; it means that the taxable value of a property is reduced by $5,000 for a surviving spouse. This benefit is available in perpetuity but is waived if the surviving spouse remarries.

Federal Exemption

Federal tax benefits for a surviving spouse take a broader range of forms. A recently widowed taxpayer may be allowed to take advantage of the benefits of filing a 澳洲幸运5官方开奖结果体彩网:joint return for two years following the year of their spouse’s death.

The surviving spouse is also eligible for a 澳洲幸运5官方开奖结果体彩网:stepped-up basis on any property that they inherit. This means that the cost basis for that property, a significant factor in determining taxes when the property is sold, is adjusted to the date of the spouse’s death.

If the spouses owned a home jointly, the basis of the deceased spouse’s share is the home's fair market value on the date of death. The basis of the surviving spouse’s interest, except in community property states, remains the same and the new basis is the sum of the two amounts.

In community property states, the entire property receives the new stepped-up basis.

If the surviving spouse sells the home within two years of their spouse’s death and certain conditions are met, including two-year ownership and principal-residence requirements, then the first $500,000 of profit from selling the home is considered tax-free by the IRS.

IRS Policy on Same-Sex Marriage

The Defense of Marriage Act (DOMA) prevented same-sex couples, with marriages recognized in their states but not by the federal government, from receiving benefits like those received by widows and widowers because, at the time of DOMA, same-sex married couples were not recognized by the federal government.

When Section 3 of DOMA was struck down in June 2013, same-sex couples' marriages were recognized as legal by the federal government and, in turn, the Internal Revenue Service (IRS).

Since the repeal of Section 3, the U.S. Department of the Treasury and the IRS have ruled that same-sex couples who are legally wed will receive and be able to take advantage of tax benefits for married couples.

However, couples must be legally married, not simply long-term partners, for widows and widowers to take ad𒆙vantage of key tax benefits available to surviving spouses.

Any couple (LGBT+ or not) in a long-term partnership but not a marriage cannot benefit from the tax breaks and benefits offered to legally married couples.

Even couples in registered domestic partnerships, civil unions, or similar formalized relationships recognized by their state still will not be recognized for tax purposes by the IRS.

Special Considerations

Another major tax issue for surviving family members has become a topic of political debate. The federal 澳洲幸运5官方开奖结果体彩网:estate tax applies to families when a wealthy individual passes away and leaves a significant estate to their survivors.

The estate tax rule has traditionally allowed for an exempt amounﷺt and has undergone revisions by Congress several tim♔es.

The estate and gift tax exemption was raised to $13.61 million for 2024. This is not strictly a widow(er)’s exemption, as all assets passed to a spouse are by law exempt from federal taxation. An estate's exemption and subsequent taxation apply to assets passed on to non-spouse family members.

The Bottom Line

A widow(er)'s exemption is a reduction of taxes allowed following the death of a spouse. It is intended to ease a potential financial burden on the surviving spouse and family that could result from their loss.

The reliefඣ provided by states generally is in the form of reduced property tax. The relief providedཧ by the federal government comes from a reduction of estate taxes.

Couples must be legally married for a surviving spouse to receive the widow(er)'s exemption.