How the Widow’s Penalty Impacts Your Taxes

By Brett Gottlieb

Losing a spouse is one of life’s most difficult experiences, and unfortunately, the emotional weight is often compounded by unexpected financial and tax consequences. Surviving partners may face a significant shift in their financial landscape, including reduced household income, increased Medicare premiums, and higher tax brackets. This situation is commonly referred to as “the widow’s penalty.”

These burdens can feel like too much to carry, especially during an already painful time. But with careful, proactive planning, it’s possible to help ease some of the financial pressure. Taking steps now can help preserve what you and your partner worked so hard to build while continuing to support your life moving forward.

Tax Implications of the Widow’s Penalty

The lifestyle change arising from a spouse’s death is significant. Healthcare, personal expenses, transportation, and financial management can all become more burdensome to meet without two incomes to support them. Adding to the financial strain, future tax liability for the widow(er) could also increase significantly. Here are some reasons why.

Changes in Income and Tax Rates

Most married couples file their tax returns jointly. When one of them dies, the survivor must file taxes in the following years as a single individual, eliminating the benefits of a joint return. The survivor’s filing status may also jump to higher-percentage tax brackets sooner than expected.

Standard vs. Itemized Deductions

The Tax Cuts and Jobs Act (TCJA) drastically changed standard and itemized deduction allowances, increasing the standard deduction slightly, but reducing the potential reduction in tax liability by itemizing. The 2025 standard deduction for joint filers is $30,000 (up from $29,200 in 2024), but the standard deduction is only $15,000 for single filers. Depending upon what income sources remain for a widow(er), the lower standard deduction could mean more taxable income as a single filer.

Medicare Income Related Monthly Adjustment Amount (IRMAA)

The IRMAA is an additional surcharge tacked on to the monthly Medicare premium in Part B and Part D plans. It’s predicated on the income and filing status from the two previous years and  is a common tax issue for higher-income retirees. Filing jointly, this surcharge doesn’t apply until the $212,000 threshold, however, as a single filer, the surcharge is applied after just $106,000 of income. Again, depending upon the income of the surviving spouse, there could be a greater likelihood of exposure to this surcharge with the lower threshold.

Net Invested Income

Married couples who file jointly may have up to $250,000 in AGI before an additional 3.8% surcharge is applied to net investment income. After a spouse dies, however, that minimum threshold drops to $200,000 as a single filer, so the lower amount may subject a surviving spouse to this additional tax surcharge on their taxable portfolio income.

Ways to Help Minimize the Widow’s Penalty on IRA Accounts

For many families, the main vessel for generating post-death income is a large IRA that has monthly required minimum distributions (RMDs) beginning April 1st after your 73rd birthday (under the SECURE 2.0 Act, that RMD age will rise to 75 in 2033). With careful tax planning, survivors can reduce the IRA’s balance to generate less taxable income.

One way to mitigate the effects of the widow’s penalty is for couples to actively manage their IRA while both partners are still alive. They may make higher after-tax contributions to their funds and convert to a Roth IRA, in which distributions are not taxed after withdrawal.

After death, the survivor has one last chance to take advantage of the joint filing status. This can reduce their tax impact immediately following their partner’s death. Couples in higher tax brackets may also think about making more charitable contributions. By donating the equivalent of their annual RMD amount to charity, the survivor may deduct the amount when filing taxes.

Start Planning Immediately

The TCJA is set to expire at the end of 2025, and no one is certain what could happen to specific tax brackets. They may revert to pre-TCJA brackets, which would reestablish higher minimum tax rates that were considerably higher. In any event, the time to start preparing for the potential of a widow’s penalty effect is now—before those measures become a reality.

Navigate the Widow’s Penalty with Support

At Comprehensive Advisor, we support our clients through the complex financial and tax-strategy decisions that follow the loss of a spouse, including addressing the often-overlooked widow’s penalty. This tax burden can significantly impact a surviving spouse’s financial picture, especially as income remains steady but tax brackets shift.

For thoughtful planning and compassionate guidance, reach out today so we can get started helping you make proactive choices to preserve your long-term financial well-being. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Comprehensive Advisor, LLC is not affiliated with the U.S. government or any governmental agency.  3051075 – 5/25