In the unfortunate event your spouse predeceases you, the IRS provides you with some tax benefits, such as allowing you to file a joint return in the year of your spouse’s death and to continue taking advantage of lower tax rates in the following two years. However, the death of your spouse doesn’t automatically entitle you to these benefits.
Year of Death
In the year your spouse passes away, the IRS will allow you to file a joint return covering the entire tax year. Regardless of the date of death, all income you earn during the year remains subject to the preferential tax rates that only married taxpayers are eligible for. This also allows you to claim a full exemption for your spouse and a larger standard deduction.
Two Years After
Provided you are eligible to file a joint return in the year of your spouse’s death, the IRS will allow you to use the qualifying widow(er) with dependent child filing status for the next two years. This filing status continues to subject your income to the same rates of tax and standard deduction that joint filers receive. However, the only difference is that you can no longer continue claiming an exemption for your spouse. For example, if your spouse passes away on Jan. 1, 2011, you can file a joint return for the 2011 tax year and claim two personal exemptions. For the 2012 and 2013 tax years only, you can elect the widow(er) status, provided you don’t remarry in either of those years. But when it comes time to file your 2014 tax return, you are no longer eligible to use the widow(er) filing status and must choose a different one, such as single or head of household.
Dependent Child Requirement
Since the IRS will not allow you to file as a widow or widower without claiming your child or stepchild as a dependent, it’s important to insure that you satisfy all eligibility requirements to claim one of them. The qualifying child rules allow you to claim these individuals if they are under 19 years of age on the last day of the tax year. However, if your dependent is a full-time student at the end of the tax year, you can continue claiming them until they reach 24 years of age. Additionally, your child or stepchild must reside with you for the entire tax year and you must be responsible for paying more than half the costs of maintaining a home.
Favorable Tax Brackets
When you continue to calculate your tax using the joint filer rates, you stand to save a substantial amount of income tax. Each federal tax bracket covers different ranges of your taxable income that are subject to the bracket-specific rate of tax. The income ranges for the lower rates of tax are much wider for joint filers than for single or head of household taxpayers. For example, a single taxpayer in 2011 is subject to the 10 percent tax rate on her initial $8,500 of taxable income; whereas, you will enjoy the 10 percent rate on up to $17,000.