Explanation of why income taxes increase for surviving spouses.

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DISCLAIMER: This video is only helpful hints and education. It is not specific tax, legal or investment advice. Before considering acting on anything you see in this video, first consult with your tax, legal or investment advisor. While the information expressed in this video is believed to be accurate, neither Andy Panko, CFP®, RICP®, EA nor Tenon Financial LLC make any guarantees to its accuracy….(read more)

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The Widow and Widower Tax Penalty refers to a situation wherein a surviving spouse is punished by higher taxes simply because they are no longer married. This penalty can be particularly devastating for those who have just lost their partner, as they are already dealing with the emotional and financial strains of widowhood.

The Widow and Widower Tax Penalty primarily affects those who receive Social Security benefits. When both spouses are alive, their joint income is calculated for tax purposes. However, when one spouse passes away, the surviving spouse loses one of their Social Security benefits and their tax bracket can shift upwards. This penalty can be particularly harmful for those who rely on Social Security income.

In addition to Social Security benefits, the Widow and Widower Tax Penalty can also affect inheritance taxes. For example, if a married couple has assets that are jointly owned and one spouse passes away, the surviving spouse may suddenly find themselves facing a much higher inheritance tax bill.

This penalty has been criticized by many advocacy groups, who argue that it unfairly punishes those who have already suffered a loss. Some lawmakers have attempted to address this issue by pushing for changes to the tax code. However, these efforts have largely stalled.

It’s important for those who have recently lost a spouse to be aware of the Widow and Widower Tax Penalty and to plan accordingly. This may involve meeting with a financial advisor or tax professional to assess your tax situation and identify any potential challenges.

Overall, the Widow and Widower Tax Penalty remains a contentious issue that affects many Americans each year. While efforts to address this issue have been slow-moving, it’s important for those who are impacted to stay informed and take steps to protect their finances.