Widow's Exemption: Know What Property Tax Exemptions They Get

KEY TAKEAWAYS

• A widow’s exclusion is a tax statute that lowers the tax burden for a widow or widower after their spouse passes away.
• The widow’s exception typically takes the form of temporarily reduced property taxes.
• The widow’s exception frequently appears on federal taxes as an exemption from certain caps on inheritance and gifts from the estate of the deceased.
• State-recognized domestic partnerships are not eligible for tax relief after a spouse’s passing, only people who are legally married. 
• State tax breaks for widows and widowers differ from one state to the next.

What Is a Widow’s Exemption?

A widow’s exemption is a reduction in tax obligations for a taxpayer after the passing of a spouse. State rules vary, but in general, a surviving spouse is entitled to a tax break for a predetermined time frame. This is frequently in the form of a reduction in property taxes. 

After a death that can lead to internal economic unrest in a household, this can help survivors and their dependents financially. Widows and widowers are exempt from paying federal estate and inheritance taxes.

How a Widow’s Exemption Works

Federal tax benefits under federal law can take a wide variety of forms. For example, the advantages of filing a joint return may be available to a recently bereaved taxpayer for up to two years after their spouse’s passing.

On whatever property they inherit, the surviving spouse is also qualified for a stepped-up basis. As a result, the cost basis for that asset is changed to reflect the date of the spouse’s passing. The cost basis affects taxes when the asset is sold.

The first $250,000 of a property’s sale proceeds are exempt from taxes according to the IRS if the surviving spouse can demonstrate that it was the couple’s primary residence.

What Does Widow’s Exemption Mean for Individuals?

For individual surviving spouses, the widow’s exemption means that they can benefit from a reduction in taxes in the immediate aftermath of the death of their loved one. 

For example, Florida permits a $500 deduction from the tax basis used to calculate property taxes. The taxable value of a property is decreased by $500 for a surviving spouse; meaning that this is not a $500 tax benefit. 

Although this benefit is always available, it is forfeited if the surviving spouse marries again.

Summary

The widow’s exemption is a tax exemption that helps grieving widows whilst they are in a state of probable turmoil.

Each state’s rules on the widow’s exemption are different. So if you are looking to gain a widow’s exemption after the loss of a loved one, it is recommended that you visit your state government website to find out how you can claim.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.