When you make a profit on selling your home, you can exclude up to $250,000 of gains from tax. Married couples filing joint tax returns can get a tax exclusion up to $500,000.
This could penalize widows and widowers. An unmarried surviving spouse can file a joint return for the year of the spouse’s death but must file as a single taxpayer after that. This would reduce the tax exclusion from $500,000 (available to married couples) to $250,000 (for singles).
There is some relief, though. A surviving spouse can use the $500,000 exclusion if the house is sold within two years of the first spouse’s death. A widow or widower who would have qualified for the $500,000 exclusion on a home sale while his or her spouse was alive can claim the larger exclusion on a sale in that two-year period, if the surviving spouse hasn’t remarried.