A sad, traumatic event is the death of a spouse. Dealing with taxes and other financial and legal duties is probably the last thing on your mind when it occurs. Unfortunately, many of these duties can’t wait and may need attention in the following months. Deciding whether to file a joint or separate income tax return for the year of death is a crucial decision that the surviving spouse must make.

Final tax return

When a person passes away, the personal representative must submit an income tax return for the year of death (as well as any unfiled returns for previous years). The tax year typically starts on January 1. It concludes on the date of death for the final return. By April 15 of the following year, the return is due.

The deceased’s typical tax accounting technique establishes the income on the final return. As an illustration, for the cash method, the income tax return would only report income actually or constructively received before death. Then, only expenses paid before death would deduct. It would also only allow deductions for cost payments before death. An estate tax return details the earnings and outlays incurred after a death.

The personal representative and the surviving spouse may submit a joint return. Suppose the selection of a personal representative has yet to happen by the filing deadline. In that case, only the surviving spouse may choose to file a joint return. However, a court-appointed personal representative may later withdraw that choice.

Pros and cons of a joint tax return

The surviving spouse can submit a joint return with the assistance of the estate since, in the year of death, on paper, they are married for the entire calendar year. If a joint return is submitted, it will contain both the surviving spouse’s income and deductions for the whole tax year and the deceased’s income and deductions from the start of the tax year until the date of death.

The following benefits of filing a combined tax return:

• You might benefit from a lower tax rate, depending on your income and a few other circumstances
• Certain tax credits are greater on a joint return or are unavailable to married taxpayers filing separately
• For joint filers, the maximum IRA contribution and deduction amounts may be higher

The decision to file jointly may have drawbacks as well. For example, the tax benefits of expenses, such as medical bills, may be reduced by a more significant adjusted gross income (AGI). However, they must be deductible only to the extent that they surpass a specific percentage of AGI. 

Calculate the numbers

Let us evaluate your tax liability using joint and individual returns to identify the best action. A joint return will include the deceased’s income and deductions from the beginning of the tax year to the date of death and the surviving spouse’s income and deductions for the entire tax year. Contact our RRBB accountants and advisors if you have any questions or need assistance with your tax planning and preparation.

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