Personal Finance

Here’s how to avoid higher taxes after a spouse dies

Published

7 hours ago

March 18, 2025

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It’s of course very difficult to lose your spouse — and some survivors may also have to deal with the shock of higher taxes after their wife or husband dies.

That’s because after a partner’s death, surviving spouses may face a “survivor’s penalty” due to the shift from married filing jointly to single filing status, potentially leading to higher taxes and increased Medicare premiums.

The survivor’s penalty is more common among older women, who typically outlive their husbands, experts say.

“That’s what I call the widow’s penalty,” said certified public accountant Ed Slott.

In 2023, there was roughly a 5.3-year difference in life expectancy between sexes, according to U.S. population data released in December from the Centers for Disease Control and Prevention. Life expectancy was 81.1 years for females and 75.8 for males.

In some cases, these survivors are “hit hard with extra taxes,” Slott said.

How the ‘widow’s penalty’ works

Most spouses file taxes jointly, which provides a larger standard deduction and wider tax brackets compared to single filers.

The standard deduction for 2025 is $30,000 for married couples, and $15,000 for single filers. The brackets are based on “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

The higher standard deduction and more generous brackets can mean lower taxes for some spouses, depending on their earnings and other factors, experts say.

In the year that a spouse dies, the surviving spouse can continue filing taxes jointly with their deceased partner, assuming they don’t remarry before year-end. With a dependent child, you can choose qualifying surviving spouse for up to two years. Otherwise, you’ll use the single-filer status the year after your spouse passes.

While Social Security income may adjust, other earnings could be the same, and the surviving spouse is back at the single tax bracket, Slott said.

The surviving spouse typically inherits their deceased spouse’s pre-tax individual retirement account and the required minimum distributions, George Gagliardi, a certified financial planner and founder of Coromandel Wealth Management in Lexington, Massachusetts, previously told CNBC.

“The larger the IRAs, the bigger the tax problem,” he said.

However, married couples can plan for this in advance, experts say.

Private assets in 401(k) plans: Here's what to know

How to avoid the widow’s penalty

You can address the life expectancy gap and possible tax consequences for the surviving spouse with assistance from a financial advisor, experts say.

That could include multiple years of tax projections for different scenarios to find out whether it makes sense to incur taxes sooner while both spouses are still living.

“You’re aiming to pay taxes when your rate is the lowest,” said CFP Jeff Levine, a certified public accountant and chief planning officer at Focus Partners Wealth in Clayton, Missouri.

You’re aiming to pay taxes when your rate is the lowest.

Jeff Levine

Chief planning officer at Focus Partners Wealth

In some cases, you may pay less taxes overall by withdrawing funds from pre-tax retirement accounts sooner, such as early retirement before starting RMDs, advisors say.

You could also weigh Roth IRA conversions in the year of the first spouse’s death, Slott said.

Roth conversions move pre-tax or nondeductible IRA funds to a Roth IRA, which can kick-start tax-free growth after an upfront tax bill.

The Roth account provides a “double benefit” with tax-free withdrawals and no RMDs during life, Slott said.

Personal Finance

Judge orders education grants in Trump DEI sweep restored

Published

2 hours ago

March 18, 2025

Business Finance News

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A judge ordered the Trump administration to temporarily reinstate some of the education grants it had nixed as part of its work to end diversity, equity and inclusion initiatives.

U.S. District Judge Julie Rubin in Maryland said that the U.S. Department of Education’s termination of the grant awards is “likely to be proven arbitrary and capricious, because the Department’s action was unreasonable, not reasonably explained, based on factors Congress had not intended the Department to consider,” and were “otherwise not in accordance with law.”

The end of the grants could have a “grave effect on the public,” Rubin wrote, including “fewer teachers for students in high need neighborhoods.”

The American Association of Colleges for Teacher Education, the National Center for Teacher Residencies and the Maryland Association of Colleges for Teacher Education filed a lawsuit earlier this month against the U.S. Department of Education and President Donald Trump for the administration’s termination of more than 100 educator preparation grants.

An analysis by the National Center for Education Statistics found that 80% of public school teachers in the 2020-2021 school year were white, 9% were Hispanic and 6% were Black.

The plaintiffs claimed that the grants were funded under Congressionally appropriated programs.

National Center for Teacher Residencies CEO Kathlene Campbell applauded the restoration of the grants.

“At a time when we as a nation are enduring local teacher shortages, especially in critical areas of need, we must not fall short in supporting the preparation of teachers,” Campbell said in a statement. “That’s why this ruling is paramount in supporting current and future teachers of the education field.”

A federal judge in Boston also recently ordered the Trump administration to temporarily restore grants for teacher preparation in eight states.

The U.S. Department of Education did not immediately respond to a request from CNBC for comment.

Personal Finance

Harvard is now tuition-free for students who qualify, expanding access

Published

5 hours ago

March 18, 2025

Business Finance News

Harvard University campus in Cambridge, Massachusetts.

Michael Fein | Bloomberg | Getty Images

Harvard University is the latest institution to announce that tuition will be free for undergraduates with family incomes of $200,000 or less beginning in the 2025-26 academic year.

It joins a growing list of select private colleges — many in the ‘Ivy Plus‘ category — that have also recently increased their financial aid awards to attract top students wary of high college costs.

In November, the University of Pennsylvania said it would guarantee a financial aid package that covered tuition with grants and work-study for students from families that make up to $200,000. That same month, Massachusetts Institute of Technology announced it would also become tuition free for undergraduates with family incomes below $200,000.

Additionally, last year other schools, such as Vanderbilt University and Dartmouth, expanded aid to include full-tuition scholarships to students of families below a certain income threshold. Even before then, Harvard, along with Duke University, Princeton University, Yale University and Northwestern University introduced “no-loan” policies, which meant they eliminated student loans altogether from their financial aid packages.

“Harvard’s announcement is long overdue given Princeton increased its threshold for 100% aid, including tuition, room and board, to families who earn less than $100,000 in 2023,” said Hafeez Lakhani, founder and president of Lakhani Coaching in New York.

Still, it is a “powerful” statement, he said — “it signals Harvard is not only matching Princeton but taking another step forward in the affordability arms race.”

Undergraduate tuition at Harvard College was more than $56,000 this year, but the total cost of attendance, including room and board, was nearly $83,000, according to the school. Harvard College is the undergraduate institution at the university.

In addition to its tuition-free offer, since 2023, the university has made schooling completely free for students from families with annual incomes under $85,000, covering tuition, food, housing, health insurance and travel costs. Now, that threshold will increase for families with incomes of $100,000 or less.

Currently, more than 50 colleges and universities are tuition-free for students with household incomes below certain thresholds, according to data from The Princeton Review.

Another nine, including College of the Ozarks and the U.S. Air Force Academy, charge no tuition at all, regardless of family income.

“Bravo to Harvard and other colleges offering free tuition to qualified applicants, as well as to all schools working to increase their financial aid awards,” said Robert Franek, The Princeton Review’s editor-in-chief. “Colleges making tuition free to eligible applicants are addressing that fear of college debt head-on.”

‘Tuition-free’ doesn’t necessarily mean debt-free

We are overly reliant on student loans to fund higher education, says NACAC CEO Angel Perez

The rising cost of college and ballooning student loan balances have been growing problems nationwide.

Taking on too much debt is now the top worry among college-bound students, according to a recent survey by The Princeton Review.

Another report in 2022 found that most Americans, overall, see the benefits of higher education but are concerned about high tuition and student debt — 83% said college costs are prohibitive to low-income students.

“Given the current climate — including Columbia losing $400 million in federal funding and Harvard being on the ‘watch list’ for similar cuts — it’s an incredibly generous move by Harvard to increase the student population who is eligible for 100% aid,” Lakhani said. “No doubt they are willing to dip into their endowment for this commitment to socioeconomic diversity.”

However, even though more colleges are eliminating education debt from the outset, students may still be on the hook for other expenses, such as room and board, as well as books and fees. There may also be a work-study requirement, depending on the school.

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Personal Finance

Social Security Administration leadership changes may impact benefits

Published

1 day ago

March 17, 2025

Business Finance News

People line up outside the Social Security Administration office in San Francisco.

Getty Images

New leadership at the Social Security Administration tied to the Trump administration’s so-called Department of Government Efficiency has implemented swift changes.

Many experts say Americans will notice a difference when seeking help from the agency following staff cuts, regional office closures and new service policies.

The Social Security Administration is currently under the temporary leadership of acting commissioner Lee Dudek, who was assumed that role in February after acting commissioner Michelle King stepped down over DOGE privacy concerns. Dudek had previously publicly stated he had been placed on administrative leave for cooperating with DOGE, according to reports.

As a temporary leader, Dudek does not have the obligation to answer to Congress.

“When you are a confirmed commissioner, you get called up to the Hill to testify on various issues that are operating for the agency,” Jason Fichtner, a former Social Security Administration executive, said during a National Academy of Social Insurance panel last week.

“It’s a check and balance that we currently don’t have,” Fichtner said.

As DOGE’s actions have upended the status quo at the Social Security Administration, former agency leaders, retirement experts and Democratic lawmakers have raised concerns about its new policies.

Meanwhile, Republicans in Congress last week praised DOGE for increasing the agency’s efficiency since President Donald Trump took office.

The Social Security Administration did not respond to a request from CNBC for comment by press time.

‘Economic security of millions of Americans is at stake’

Last week, the National Academy of Social Insurance, a non-profit, nonpartisan organization, released a statement signed by recipients of its award named on behalf of former Social Security Administration Commissioner Robert M. Ball, who served in that role from 1962 to 1973.

“The economic security of millions of Americans is at stake,” the signees wrote of the “major, destabilizing changes” the Social Security Administration has recently undergone.

Among those to sign the statement include former acting Social Security Administration commissioner Kilolo Kijakazi, former Treasury Secretary Jacob Lew and former Social Security Administration chief actuary Stephen Goss.

The statement lists “unprecedented actions” recently undertaken by the Social Security Administration, including:

staff reductions of about 7,000 of the agency’s 57,000 employees while the agency already has an employee shortage and hiring freeze;
the closure of 10 field offices, which may limit access to benefits;
a reorganized leadership structure that will have just five deputy commissioners, who will now be political appointees;
the closure of the Office of Civil Rights and Office of Transformation in an effort to cut costs; and
the termination of research focused on how to improve Social Security, both from administrative and legislative standpoints.

Top Social Security official exits after refusing DOGE access to sensitive data

“Getting benefits to the currently and newly eligible, and accurately determining how much those benefits should be, requires the work of current SSA staff and more,” the NASI statement reads.

Among those most vulnerable to longer wait times for benefits are the 2 million disability benefit applicants who are currently waiting on decisions. An estimated 10 million individuals have died in recent years while still waiting for disability benefits, the statement notes.

The customer service crisis faced by the Social Security Administration, including record initial disability backlog and customer service wait times, existed before DOGE, House Ways and Means Committee Chairman Jason Smith, R-Mo., said during a March 12 committee hearing.

The Trump administration has said the president “will always protect” Social Security and will not cut benefits.

“Any American receiving Social Security benefits will continue to receive them,” White House Press Secretary Karoline Leavitt said via email Monday when asked about the NASI statement. “The sole mission of DOGE is to identify waste, fraud, and abuse only.”

Confirmation process ‘needs to move along quickly’

Trump has nominated Frank Bisignano, chief executive of payments and financial technology company Fiserv, to serve as commissioner of the agency.

Bisignano’s Senate confirmation hearing is expected to take place in the coming weeks.

Former Social Security Administration Commissioner Michael Astrue, who led the agency from 2007 to 2013, said last week during a panel hosted by the National Academy of Social Insurance that while he doesn’t know Bisignano, “he can’t possibly be worse than what we have now.”

While the confirmation process has moved slowly in the past, it would be better to move swiftly and find a suitable leader for the agency, Astrue said.

“The process needs to move along quickly,” Astrue said.

Fiserv CEO on the nomination to Social Security Commisioner role

When Bisignano does sit before the Senate, he will have to answer “a lot of questions in the confirmation process, beginning with, what did you know and when did you know it?” former Social Security Administration Commissioner Martin O’Malley, who led the agency from 2023 to 2024, said during the NASI panel.

Senators may want to know whether Bisignano “approved and blessed” changes after his nomination such as cutting staff, eliminating offices and closing regional headquarters, O’Malley said.

Last week, Democratic Sens. Elizabeth Warren of Massachusetts and Ron Wyden of Oregon sent a letter to Bisignano emphasizing that he will be responsible for any benefit interruptions that may be prompted by sweeping changes at the agency. In the letter, they also included questions on his views on DOGE access to sensitive data, further staff cuts or other possible future plans for the agency.

Bisignano was not available for comment by press time.

Smith: Seniors ‘already seeing the benefit’

A new law that President Joe Biden signed on Jan. 5 — the Social Security Fairness Act — has made it so more than 3.2 million individuals who are eligible for public pensions will receive increased Social Security checks.

In addition, affected beneficiaries also stand to receive payments dating back to January 2024.

The Social Security Administration said in January it would take 1,000 work hours to send those back payments, much of which had to be done manually on a case-by-case basis, House Ways and Means Committee Chairman Smith said during a March 12 committee hearing.

However, that outlook has changed under Trump’s leadership, according to Smith.

“Seniors are already seeing the benefit of doing things differently,” Smith said.

The agency has already sent more than 71% of all back payments to affected beneficiaries, he said.

“The Trump administration’s embrace of automation and technology has made a night and day difference for those affected seniors,” Smith said.

“This is how the agency should work,” he said.