Tax

Losing a spouse is difficult, and taxes are likely the last thing on your mind. But the tax consequences arrive on a delayed schedule that creates a valuable planning window—one that closes quickly if no one is watching.

Here is the timeline: For the year when your spouse dies, you may still file a joint return covering the entire year. If you maintain a household for a dependent child and do not remarry, you may file as a qualifying surviving spouse for the next two years, keeping the joint brackets and the joint standard deduction. After that, you file as a single taxpayer.

That final step is where the “widow’s penalty” hits. Single-filer brackets sit at roughly half the joint thresholds, so the same income produces a much larger tax bill. On $400,000 of taxable income, filing status alone can cost about $27,500—every year going forward. Your standard deduction drops by more than half, and the senior bonus deduction can shrink or disappear entirely because its phaseout thresholds also fall.

Medicare follows two years later. Your premiums for any year depend on the income and filing status you reported two years earlier, so the surcharge increase from single status shows up later than you would expect.

While the joint-filing window stays open, several moves deserve attention, such as Roth conversions at the wider joint brackets, capital gains harvesting, and date-of-death valuations to capture the basis step-up before records go cold. If your income drops after the death, Form SSA-44 can lower your Medicare premiums early—but it does nothing about the lower single-filer thresholds.

If you want to discuss the death of a spouse, please call me directly at 408-778-9651.

• By Leon Clinton
• September 30, 2026

If you own real property with substantial equity, here is a warning worth taking seriously: never let the government sell it for unpaid taxes.

A recent U.S. Supreme Court decision, Pung v. Isabella County, shows why. A Michigan family disputed a property tax bill of $2,241.93. They took the assessor to the state tax tribunal and won. The assessor imposed the tax again; the family litigated a second time, and they won again. The county foreclosed anyway.

The home, which the county itself had valued at $194,400, sold at public auction for $76,008—about 39 percent of its value. Eighteen months later, the auction buyer resold it on the open market for $195,000.

The family sued, arguing they were entitled to fair market value minus the tax debt. A unanimous Supreme Court disagreed. When a tax sale is fairly conducted, the actual auction price—not fair market value—is the baseline for just compensation. The family recovered only the $73,766 surplus. Measured against the county’s own valuation, they lost roughly $118,000 over a $2,242 dispute.

You do have a constitutional right to the surplus proceeds after taxes and costs, but you may have to follow state claim procedures and deadlines to collect it.

The practical lesson is to act well before any redemption deadline. Tax auctions routinely produce prices far below market value, so you will almost always do better refinancing the property, borrowing against it, or selling it yourself and paying the taxes from the proceeds.

Also, read every tax notice you receive. If a bill looks wrong, contest it. But understand that winning on the assessment does not automatically stop a foreclosure already underway.

If you want to discuss tax sales, please call me directly at 408-778-9651.

• By Leon Clinton
• September 28, 2026

The self-employed health insurance deduction is one of the most valuable adjustments available to you. It reduces adjusted gross income dollar for dollar; you get it whether or not you itemize, and the lower adjusted gross income can preserve other benefits that phase out as income rises.

It is also one of the easiest deductions to lose. Three tests decide whether your premiums count:

1. Was the plan established under your business? If you are a sole proprietor or a partner, you have flexibility. The policy can sit in the name of the business or in your own name.

If you are an S corporation shareholder who owns more than 2 percent, you have no such flexibility. The premiums must run through payroll and appear as wages in box 1 of your Form W-2. Pay them personally and skip that step, and the self-employed health insurance deduction disappears.

2. Were you eligible for subsidized employer coverage? You lose the deduction for any month you were eligible to participate in a subsidized plan maintained by an employer—yours, your spouse’s, or that of a dependent or a child under age 27.

Note that eligibility alone is the disqualifier. If your spouse declines employer coverage in favor of your policy, those months are gone.

3. Is it medical care insurance? Disability income coverage, accidental death and dismemberment policies, and fixed-benefit hospital indemnity plans are not medical care insurance and do not qualify.

There is one more limit: the deduction cannot exceed your net earnings from the business under which the plan was established.

If you want to discuss the self-employed health insurance deduction, please call me directly at 408-778-9651.

• By Leon Clinton
• September 25, 2026