Widow's Exemption: Definition, State and Federal Tax Rules

What Is a Widow's Exemption?

A widow’s exemption refers to a reduction of tax burdens on a taxpayer following the death of a spouse. State laws vary but generally allow for a reduction in taxes for a surviving spouse for a certain period, which often comes in the form of a reduction in property taxes. This can help survivors and their dependents financially after a death that may cause internal economic turmoil in a household. On a federal level, widows and widowers receive tax relief from estate and inheritance windfalls.

Key Takeaways

  • A widow's exception is a tax statute that reduces the tax burden for a widow or widower after their spouse passes away.
  • In many states, the widow's exception comes in the form of reduced property taxes for a period of time.
  • The widow's exception typically appears on federal taxes as an exemption on certain limits for gifts and inheritances from the deceased's estate.
  • Anyone who is legally married qualifies to receive tax relief after a spouse's death, but not state-recognized domestic partnerships.
  • State tax relief for widows and widowers varies state by state.

Widow’s Exemption

Understanding Widow's Exemptions

Widow’s exemption refers to a tax deduction available to a recently widowed spouse. This type of benefit is available to a surviving spouse regardless of gender. State tax relief varies from state to state but most commonly involves a reduction in property tax for the surviving spouse.

The most common form of a state widow’s exemption refers to the type offered in Florida. The state allows for a $500 deduction in the tax basis on which property taxes are based. This is not a $500 tax credit; it means that the taxable value of a property is reduced by $500 for a surviving spouse. This benefit is available in perpetuity but is waived if the surviving spouse remarries.

Federal tax benefits for a surviving spouse take a broader range of forms. A recently widowed taxpayer may be allowed to take advantage of the benefits of filing a joint return for up to two years following their spouse’s death.

The surviving spouse is also eligible for a stepped-up basis on any property they inherit. This means that the cost basis for that property, a significant factor in determining taxes when the property is sold, is adjusted to the date of the spouse’s death. If the surviving spouse can prove that a property was the couple’s primary residence, the first $250,000 of profit in selling the home is considered tax-free by the IRS.

These are just a few of the major forms of tax relief available to a widowed spouse. Other smaller benefits involve inherited individual retirement accounts (IRAs) and life insurance policies.

IRS's Policy on Same-Sex Marriage

The Defense of Marriage Act ("DOMA") prevented same-sex couples, with marriages recognized in their states but not the federal government, from receiving benefits like those received by widows and widowers because, at the time of DOMA,, same-sex married couples were not recognized by the federal government. When Section 3 of DOMA was struck down in June 2013, same-sex couples' marriages were recognized as legal by the federal government and, in turn, the Internal Revenue Service.

Since the repeal of Section 3, the U.S. Department of the Treasury and the IRS ruled that same-sex couples who are legally wed will receive and be able to take advantage of tax benefits for married couples. However, the key is that couples must be legally married, not simply long-term partners for widows and widowers, to take advantage of key tax benefits for surviving spouses. Any couple (LGBT+ or not) in a long-term partnership but not a marriage cannot benefit from the tax breaks and benefits offered to legally married couples.

Even couples in registered domestic partnerships, civil unions, or similar formalized relationships recognized by their state still will not be recognized for tax purposes by the Internal Revenue Service.

Special Considerations

Another major tax issue for surviving family members has become a topic of political debate in recent years. The federal estate tax applies to families when a wealthy individual passes away and leaves a significant estate to their survivors. The estate tax has traditionally allowed an exempt amount and has undergone revisions by Congress several times in recent years.

The estate and gift tax exemption was raised to approximately $11.5 million in 2020. However, this is not strictly a widow’s exemption, as all assets passed to a spouse are by law exempt from federal taxation. An estate's exemption and subsequent taxation apply to assets passed on to non-spouse family members.

Do I Qualify for Tax Benefits If My Live-In Partner Dies?

If you are legally married to your partner, then you will qualify for tax benefits as a surviving spouse. If you are only living together, even if recognized by the state, you will not qualify.

What Is a Widow's Exemption on Taxes?

A widow's exemption is a tax deduction offered after your spouse dies.

What Benefits From the IRS Do I Get If I Am a Widow?

If your spouse dies, besides being eligible for benefits from the Social Security Administration, you may qualify for a widow's tax exemption in the form of a deduction, and you may be eligible to file joint taxes for two years following a spouse's death.

Do I Have to Pay Taxes on Social Security Survivor's Benefits?

Yes. If you receive any form of survivor benefits from the Social Security Administration, they will be taxed as income.

Article Sources
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  1. Florida Department of Revenue. "Eligibility Criteria to Qualify for Property Tax Exemption," Page 1.

  2. Internal Revenue Service. "Publication 501: Dependents, Standard Deduction, and Filing Information," Page 9.

  3. Internal Revenue Service. "Publication 559: Survivors, Executors, and Administrators," Page 14.

  4. Internal Revenue Service. "Publication 523 (2018), Selling Your Home."

  5. Internal Revenue Service. "Publication 559: Survivors, Executors, and Administrators," Pages 12-13.

  6. National Society of Tax Professionals. "DOMA- Introduction to the Federal Tax Issues of Legally Married Same Sex Couples after the Windsor Supreme Court Case Decision."

  7. Internal Revenue Service. "Estate and Gift Tax FAQs."

  8. Internal Revenue Service. "What's New - Estate and Gift Tax."

  9. Internal Revenue Service. "Estate Tax."

  10. Internal Revenue Service. "Publication 501: Dependents, Standard Deduction, and Filing Information," Page 9.