For the Widowed and the Divorced

A death or a divorce changes the filing status, and the filing status changes everything: the brackets, the standard deduction, the capital-gains thresholds, the senior-deduction and IRMAA lines, and the Social Security formula are all roughly half as generous for a single filer as for a couple. That is the widow’s penalty and the divorcée’s penalty, and it is permanent. What is not permanent are the transition rules: the last joint return, the two years of surviving-spouse status, the two-year and three-year house windows, the step-up, and the choices about the IRA and the pension that have to be made once and early.

This page gathers the strategies for both situations because they share the mechanism: a status that is about to get worse, and a short period to act while it is still good. Grief and divorce are the worst time to think about tax, which is why the list is short and the deadlines are specific.

1. Use the Last Joint Year, and the Two Years After

The IRS calls it: §6013(a)(3) and §2(a), qualifying surviving spouse

The 2026 figure: the year a spouse dies, the survivor files a joint return for the whole year (unless remarried by December 31). For the next two years, a survivor with a dependent child at home uses the joint brackets and the $32,200 standard deduction as a qualifying surviving spouse. After that, single or head of household.

The last joint year is the last year of joint rates, and the year the deceased’s medical bills are deductible against joint income; it is the year to recognize income that would otherwise be taxed later as a single filer (next strategy). For a divorce, the equivalent window is the opposite: a decree final on December 31 makes both spouses single for the whole year; a decree final on January 2 gives one more joint return, if the two can sign one. Full articles: Understanding the Widow’s Penalty, Divorce and Taxes.

2. Sell the House Inside the Window

The IRS calls it: §121(b)(4) and §121(a)

The 2026 figure: a surviving spouse keeps the $500,000 exclusion for a sale that closes within two years of the death; after that, $250,000. Anyone who moves out keeps the full exclusion for about three years; after that, none. Divorcing spouses who sell while both still own the house get $250,000 each; the one who keeps it gets $250,000 later.

For a widow in a long-held Front Range house, the two-year window plus the half step-up (next strategy) usually covers the entire gain; year three does not. For a divorcing couple with a house that has $600,000 of gain, a sale before the decree excludes it all; a transfer of the house to one spouse followed by a sale excludes $250,000. The timing is worth tens of thousands of dollars in both cases, and it is decided by a closing date.

3. Record the Step-Up

The IRS calls it: §1014 and §2040(b)

The 2026 figure: the deceased spouse’s half of every jointly owned asset (the house, the brokerage account, the land) takes a new basis equal to its value at death; the deceased’s separately owned assets step up entirely. The survivor’s half keeps the old basis.

Nothing happens automatically. The broker keeps reporting the couple’s original cost on every share until told, in writing, with the date of death; a survivor who sells five years later without the step-up overpays on half the gain. Get a date-of-death appraisal for the house and a date-of-death statement from the broker within a few months. (Divorce is the opposite: property that moves between spouses keeps its old basis, so the spouse who takes the appreciated house is taking the gain too.) Full article: Inherited Property and the Step-Up.

4. The Spousal IRA: Roll It, or Keep It Inherited

The IRS calls it: §402(c)(9) and §401(a)(9)(B)(iv)

The 2026 figure: a surviving spouse can roll the deceased’s IRA or 401(k) into her own (RMDs on her own schedule, 10% penalty if she takes money before 59½), or keep it as an inherited IRA (no 10% penalty at any age; RMDs delayed until the deceased would have reached 73). A survivor under 59½ who needs the money should keep it inherited; one who doesn’t should roll it. The choice can be made later; the rollover can’t be undone.

A 54-year-old widow who rolls her husband’s $600,000 401(k) into her own IRA and then needs $50,000 for the roof pays the 10% penalty on it; left as an inherited account, the same withdrawal is penalty-free. At 59½ she can roll the rest. The 2024 regulations also let a surviving spouse elect to be treated as the deceased for RMD purposes, using the more favorable table (verify the final-regulation spousal election mechanics). Full article: When a Loved One Dies.

5. Convert in the Last Joint Year

The IRS calls it: §408A(d)(3)

The 2026 figure: in the year of death (joint return) and the two qualifying-surviving-spouse years, convert traditional IRA money to Roth up to the top of the joint 22% bracket ($211,400 of taxable income in 2026). From the first single year, the same income is taxed at 24% above $105,700.

A widow with $800,000 in traditional IRAs and $70,000 of other income has about $140,000 of 22% room on the last joint return. Converting it pays 22% now on money that would otherwise be taxed at 24% to 32% as a single filer, or at the children’s rates within ten years. The same logic applies to realizing a large capital gain or taking a distribution for a planned expense in the joint year rather than the single one. Full article: Roth IRAs.

6. Divorce: The QDRO and the Penalty-Free Cash

The IRS calls it: §414(p) and §72(t)(2)(C)

The 2026 figure: a 401(k) or pension divided by a qualified domestic relations order moves to the former spouse tax-free; cash taken by the former spouse directly from the plan under the QDRO is taxable but not penalized, at any age. Once rolled to an IRA, the exception is gone.

A spouse receiving $300,000 of a 401(k) who needs $60,000 for a down payment should take the $60,000 from the plan before rolling the rest; taking it from the IRA afterward costs $6,000 in penalty. IRAs are divided by the decree without a QDRO, as a trustee-to-trustee transfer, and carry no penalty exception. A 401(k) cashed out and handed over as a check is a taxable distribution to the employee plus the penalty, and it happens every year. Full article: Splitting the 401(k).

7. Divorce: Who Claims the Children, and What Transfers

The IRS calls it: §152(e) and Form 8332

The 2026 figure: the parent with more nights claims the child; a signed Form 8332 hands the other parent the $2,200 child tax credit and nothing else. Head of household, the earned income credit and the dependent care credit stay with the custodial parent every year.

Decrees that alternate “the exemption” usually mean the credit, and the custodial parent keeps the status and the other credits regardless. Alimony under any agreement signed after 2018 is neither deductible nor taxable; child support never was. Legal fees for the divorce are not deductible. Full article: Divorce and Taxes.

8. File Form SSA-44

Social Security calls it: a life-changing event for the income-related monthly adjustment amount

The 2026 figure: Medicare premiums are set by income from two years earlier, which for a new widow or a newly divorced person is a joint return with two incomes. Death of a spouse and divorce are both listed life-changing events; Form SSA-44 with the death certificate or decree asks Social Security to use current-year income instead.

A widow whose joint 2024 return showed $230,000 and whose own 2026 income is $90,000 is billed the second IRMAA tier (about $2,400 extra for Part B and D) unless she files the form. It is one page and it is routinely granted. The same form covers the sale of a business, a pension loss, and retirement itself. Full article: Medicare IRMAA.

9. Your State: Survivor Pensions, Retirement Income Breaks, and State Estate Taxes

The states call them: retirement income subtractions or exclusions, state estate and inheritance taxes, and public-pension division orders

The 2026 figure: varies by state. A survivor pension, an inherited IRA distribution and the survivor’s own Social Security are all retirement income to the survivor, and many states with an income tax exclude some or all of it, some at any age and some only past an age or under a cap (verify). Senior property tax relief is on the assessor side, not the income tax return: senior homestead exemptions and assessment freezes are claimed with the county assessor, and whether they continue for a surviving spouse under 65 who stays in the home is a local question (verify). In a divorce, state and local public pensions are usually divided by the retirement system’s own order, not an ERISA QDRO (verify).

Where a state exclusion has an income limit, a single survivor can lose it the same way the federal thresholds are lost; where it has none, the reason to convert in the joint years is purely federal. About a dozen states and the District of Columbia also have an estate or inheritance tax of their own, with exemptions far below the federal $15 million and often not portable between spouses, so a couple whose estate would clear the federal line with room to spare can still owe the state (verify). How Virginia treats survivors, retirement income and estates is in the Virginia articles.