Ep 86 Smart Planning to Avoid the Widow Tax Penalty In the Future

Red Barn Financial Podcast

When one spouse passes there is a little known and unintended consequence from a tax perspective. It’s often called the Widow Penalty. This is the result of the fact that generally a retired married couple lives on close to the same amount of money (because of the shared household expenses) when they are both alive as compared to when one passes.

The issues comes from the fact that now the surviving spouse is single and their standard deduction is cut in half. In 2024 that would be from $29,200 married filing joint vs $14,600 if they were single.

Additionally, the amount of income they can earn per each tax bracket is roughly half of what it would be if they were still considered married. For example, a Married couple with $201,050 of taxable income would be at the top of the 22% tax bracket, while a single person with the same income would be in the 32% bracket, some 10% and 2 brackets higher.

The best way to avoid this is to be proactive with your tax planning. A financial advisor such as myself can help you with this.

Disclaimer: This podcast is not tax, legal or financial advice. Every person’s situation is different. If you would like to discuss your personal situation, feel free to reach out to Sean at 615-619-6919, email smoran@redbarnfinancial or schedule a meeting at Calendly.com/spmoran