Surviving spouses may face unexpected tax increases

Losing a spouse can be very difficult. Survivors may also face unexpected financial challenges, including higher taxes. Financial experts warn about a potential "survivor's penalty" that can occur after a spouse passes away. This penalty arises when a surviving spouse switches from filing taxes jointly to filing as a single person. The change can result in higher taxes and increased Medicare premiums. This situation is more common among older women, who often outlive their husbands. When couples file taxes together, they generally benefit from larger deductions and wider tax brackets. For 2025, the standard deduction for married couples is $30,000, while single filers have a deduction of only $15,000. After the death of a spouse, survivors can file jointly for that tax year, but must file as single in the subsequent year. Survivors usually inherit their partner's retirement accounts, which can complicate their tax situation. Experts recommend that couples plan for these changes in advance. Consulting a financial advisor is key. They can help project taxes under various scenarios and suggest strategies to minimize future tax burdens. One approach may be to withdraw funds from retirement accounts sooner or consider converting traditional IRAs to Roth IRAs. Roth IRAs allow tax-free growth and withdrawals, potentially offering significant long-term benefits. Taking these steps can help ease the financial impact of losing a partner.