After the death of a spouse, supportive friends and loving relatives may shelter a grieving loved one from daily cares, but when they leave, the one left behind must face some financial tasks. Executors and professional advisers may provide assistance when wrapping up the financial affairs of a loved one, but you must file a final return for your husband’s individual taxes.
Death of a Taxpayer
Each taxpayer has a distinct account with the Internal Revenue Service. When that taxpayer dies, his account is closed and a new account is created in the name of the estate of the taxpayer. The taxpayer may have been your husband, but his estate is a separate tax entity: his individual tax liability ends on the day he dies. Only income produced by investments or real property appreciation after the estate “opens” presents a future tax liability for heirs when the proceeds are distributed — not the value of the investment or property itself. So it’s important to record the exact value of investments and other property on the day your husband died.
Executors with accounting or legal skills become valued counselors in preparing financial statements and taxes for your husband’s estate. An up-to-date will appointing an executor or administrator ensures that you'll have help organizing documents and notifying Social Security and other pertinent parties of your husband’s death. They can also help file claims and notifications on a timely basis to support your final tax return. An experienced administrator can also help you decide whether to file a joint return (including both your income for the entire year and your husband’s for the part of the year he was alive) or a separate return for your own income.
When you file a federal tax return for the year in which your husband died, you may claim the personal exemptions and full standard deduction of a married couple filing jointly. Whether filing joint or single returns, add the term “(deceased)” and date of passing after your husband’s name on the form. Surviving spouses claiming a refund who choose to file a separate return should also file an IRS form titled “Statement of Person Claiming Refund Due a Deceased Taxpayer." State laws regulating community property, capital gains and inheritance may vary by state, so find a qualified financial adviser or probate-qualified attorney to advise you as long as you must manage proceeds of your marriage or until the estate is closed.
You may file as a widow up to two years following your husband’s death, a status that allows other benefits including possible exemption of insurance proceeds as well as exemption of some or all capital gains on the sale of a house. Check IRS and state publications for other considerations. For example: Earned income credit may be claimed for the year that the decedent died, but S corporation loss carry-forwards may not. These conditions are all subject to change, so check the IRS and your state's income-tax websites for the most updated info. Lastly, whether or not your administrator actually completes your personal taxes, she must sign your personal return “on behalf of the decedent."
An avid perennial gardener and old house owner, Laura Reynolds has had careers in teaching and juvenile justice. A retired municipal judgem Reynolds holds a degree in communications from Northern Illinois University. Her six children and stepchildren served as subjects of editorials during her tenure as a local newspaper editor.