The death of a spouse brings significant personal and financial changes, including important tax considerations. One question surviving spouses face is how to file their federal income tax returns for the year of death.
In many cases, a surviving spouse can file a joint return with the deceased spouse for that year, potentially preserving lower tax rates and other benefits. However, special rules apply, and understanding the filing requirements can help avoid complications and ensure available tax benefits aren’t overlooked.
Filing a final return
When a person dies, his or her executor (called a “personal representative” in some states) must file an income tax return for the year of death (as well as any unfiled returns for previous years). For purposes of the final return, the tax year generally begins on January 1 and ends on the date of death. The return is due on April 15 of the following calendar year unless the executor requests a six-month filing extension.
Income that’s included on the final return is determined according to the deceased’s tax accounting method. Individuals usually use the cash method, in which case the income tax return will report only income actually or constructively received before death and deduct only expenses paid before death. Income and expenses after death are reported on an estate tax return.
Filing a joint return
The surviving spouse is generally treated as married for the tax year his or her spouse died, unless he or she qualifies as unmarried under special rules. So filing as single or head of household usually isn’t an option. The surviving spouse does have the option to file a joint return with the deceased spouse — if the executor agrees. And the surviving spouse alone can elect to file a joint return if an executor hasn’t yet been appointed by the filing due date. (However, a court-appointed executor may later revoke that election.)
A joint return generally includes the deceased spouse’s income and deductions through the date of death, along with the surviving spouse’s income and deductions for the entire tax year. Filing jointly can be advantageous because joint filers typically have access to more favorable tax brackets and may qualify for deductions and credits that are reduced or unavailable to married taxpayers filing separately.
When filing separately may make sense
There may be disadvantages to filing jointly. For example, higher adjusted gross income (AGI) may reduce the tax benefits of expenses, such as medical bills, that are deductible only to the extent they exceed a certain percentage of AGI. In this case, filing separately may provide more tax savings. Similarly, filing separately sometimes may produce a better result because of the couple’s particular mix of income, deductions and other tax attributes.
Filing a separate return may also be appropriate when the surviving spouse has concerns about the accuracy of the deceased spouse’s tax information or about previously undisclosed income, questionable deductions, unpaid taxes or other potential tax problems. In some situations, filing separately may help limit the surviving spouse’s exposure to liabilities associated with items reported (or not reported) on the deceased spouse’s return, though the extent of that protection depends on the facts and circumstances.
Look beyond the final joint return
The year of death may not be the end of the potential benefits of joint filing. Under certain conditions, a surviving spouse with a dependent child may qualify to use qualifying surviving spouse status for the two tax years following the year of death. This status generally provides the same tax brackets and standard deduction available to married couples filing jointly.
There are many factors to consider when deciding whether to file jointly or separately after a spouse’s death. We can compare the alternatives, explain the potential risks and benefits, and help ensure that required returns are filed properly during a difficult time.
