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.

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.

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.

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.