The ‘widow’s tax penalty’ results in higher taxes on less income after your spouse dies — why you should plan for it now

Core Insights - The "widow's tax penalty" can lead to increased tax burdens and reduced income for surviving spouses after the death of a partner [2][3] Tax Implications - The widow's tax penalty arises from changes in filing status after a spouse's death, potentially resulting in a lower standard deduction and higher marginal tax rates [2] - Surviving spouses may face more of their Social Security benefits being taxed and could incur Medicare IRMAA surcharges [2] Financial Impact - A retired couple with an annual income of $120,000 may see their effective tax rate rise from approximately 16.3% to 21.5% or more after one spouse passes away and the survivor files as single [3][4] - This situation results in both a decrease in income and an increase in tax liability, compounding the financial strain on the survivor [3][4] Mitigation Strategies - Planning ahead is crucial; retirement plans should account for scenarios where one spouse may pass away, allowing for adjustments in income needs, tax brackets, and filing status [5]