26 Jun Are there any special tax breaks for widows?

Q. My husband passed away. Are there any widow tax exemptions? Also after he died, his company accelerated his restricted stock in our brokerage account and I received a 1099-MISC from his company. Is there a tax break on this?
— Widow

A. We’re sorry to hear about your husband.

Here’s how it works taxwise.

Taxpayers whose spouse died during the tax year are considered married for the entire year, provided they did not remarry, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

The surviving spouse is eligible to file as Married Filing Jointly or Married Filing Separately, he said.

Surviving spouses who have remarried must file with the new spouse, either jointly or separately, he said, and the deceased spouse’s filing status becomes Married Filing Separately.

Surviving spouses who have a dependent child may be able to use the Qualifying Widow(er) status in the two tax years following the year of the spouse’s death, he said.

That’s about it.

Restricted stock, or RSUs, are considered taxable income in the year they vest and like most RSU plans, upon the death of the employee who was awarded the RSUs, they vest immediately and are taxable, Papetti said.

“The RSU taxable income is considered Income In Respect of a Decedent and you are able to offset the taxable income with any estate tax that was paid as a result of the RSUs being included in the decedent’s estate,” Papetti said. “If no estate tax was paid, no deduction for Income In Respect of a Decedent is allowed.”

There are no other tax breaks to offset the RSU taxable income, he said.

You may want to meet with a qualified tax preparer who can examine all of your tax questions with specificity to make sure you take advantage of everything available to you.

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This story was originally published on June 26, 2023.

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