Beware The Widow's Tax Trap

An episode of the The Josh Scandlen Podcast podcast, hosted by Josh Scandlen, titled "Beware The Widow's Tax Trap" was published on February 25, 2019 and runs 19 minutes.

February 25, 2019 ·19m · The Josh Scandlen Podcast

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Summary

Widows pay a huge amount of taxes, especially when compared to what they paid when they were married.  Unfortunately, by the time one is a widow/widower there is little they can do to avoid the insane tax burden they face.  And yet, very few retirement planning blogs, magazines, Youtube videos, TV shows discuss this.  Certainly, the IRS doesn't, neither does Social Security.  So, a widow is in for a huge surprise come tax time when they are no longer Married Filing Jointly.  Watch as I go through a typical scenario I've seen time and again with clients. It starts with the fact that widows will have LESS income coming in than when they were married, due to the simple fact, they will lose one of the two Social Security benefits they were receiving when married. Yet, they also lose a standard deduction.  Plus, less income is required for a single taxpayer to be in a higher tax bracket.  For example, taxable income of $40k for a married couple puts them at the low end of the 12% bracket.  That same income for a widow puts her at the low end of the 22% bracket! Oh it gets worse.  Social Security is taxed more favorably for a married couple than a single taxpayer too. So, it's a triple whammy for widows.  Loss of 1 standard deduction,  increase in tax brackets and increase in taxation on Social Security benefits. Widows, then, pay substantially MORE in tax while earning substantially LESS income! Don't believe me? Just watch...and learn.

Episode Description

Widows pay a huge amount of taxes, especially when compared to what they paid when they were married.

Unfortunately, by the time one is a widow/widower there is little they can do to avoid the insane tax burden they face.

And yet, very few retirement planning blogs, magazines, Youtube videos, TV shows discuss this.

Certainly, the IRS doesn't, neither does Social Security.

So, a widow is in for a huge surprise come tax time when they are no longer Married Filing Jointly.

Watch as I go through a typical scenario I've seen time and again with clients.

It starts with the fact that widows will have LESS income coming in than when they were married, due to the simple fact, they will lose one of the two Social Security benefits they were receiving when married.

Yet, they also lose a standard deduction. Plus, less income is required for a single taxpayer to be in a higher tax bracket.

For example, taxable income of $40k for a married couple puts them at the low end of the 12% bracket.

That same income for a widow puts her at the low end of the 22% bracket!

Oh it gets worse.

Social Security is taxed more favorably for a married couple than a single taxpayer too.

So, it's a triple whammy for widows. Loss of 1 standard deduction, increase in tax brackets and increase in taxation on Social Security benefits.

Widows, then, pay substantially MORE in tax while earning substantially LESS income!

Don't believe me?

Just watch...and learn.