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The Widows Penalty: Tax Differences Between Married Couples and Singles – Finger Financial Five #112

“In the world, nothing is certain except death and taxes.” – Ben Franklin

The Widows Penalty: The differences in taxation between filing a joint tax return as a married couple and filing as a widow(er) single person.

We won’t live forever. No shocking news there, is it?

Most couples who are engaged in retirement planning, think both will live a long time. 

Unfortunately, we may be called to the hereafter without warning. 

Whom we leave behind and how we leave our finances, can have taxable consequences. 

Why? They no longer can file a joint tax return the year after the spouse dies and lose joint tax benefits. 

Here are just a few of the taxable differences between couples and singles. 

  • The standard deduction for 2023 is $27,700 for married couples. $13,850 for singles. Meaning there would be $13,850 more income that would be subject to tax for singles. 
  • Long-term capital gains tax is 0% for joint filers up to $89,250 in 2023. For singles, it is $44,625. 
  • Annual gift exclusion is $17,000 per person. A couple can give $34,000 and a single can give only $17,000 without gift tax. 
  • Ordinary income brackets for just the 22% bracket is $89,451-$190,750. $190,000 in taxable income for singles falls into the 32% bracket! Going from 22% to 32% is a 45% increase! 
  • Medicare premium costs single filers more as well. $190,000 in income Part B Premium on joint filers is $164.90. For Single filers, it is $527.50. That is over a 3X as much for Medicare!

*Preliminary 2023 numbers

For a full list of 2023 brackets, reply to this email, and will send one to you.  

Tax planning over your lifetime can help you and your heirs reduce these penalties. I recommend working with a company that knows your entire financial picture.  This can help you and your survivors navigate these challenges.

Let me know if you have any questions. Click here to set up a phone appointment, reply to this email, or call the office at 843-970-1049. 

On the lighter side, taking the family to Puerto Rico this weekend. It takes me about three days to relax on vacation. That’s about the time we head back. 

Hope you and your family have a wonderful holiday,

Jeremy 

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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