Key Takeaways
- On The Ramsey Show this week, Dave Ramsey told a caller who was married for 41 years and has just lost her husband to hold off on big decisions while she grieves.
- A widow who sells her main home within 2 years of her husband’s death, and hasn’t remarried, can still exclude up to $500,000 of gain, compared with $250,000 for a single seller.
- On an assumed $400,000 gain, selling inside that window means $0 of federal tax, while selling after it leaves $150,000 taxable, a $22,500 bill at the 15% rate.
- Ramsey’s six months to a year of doing nothing still leaves time to sell inside the 2-year window.
If you’ve just lost your husband or wife, you’ll hear one piece of advice over and over: don’t rush into anything. On the house, at least, you have two years to take that advice without giving up a big federal tax break.
First, breathe
A caller on The Ramsey Show this week had been married 41 years when her husband died, and she’d been his caregiver for 14 of them. She’s still working, making about $250,000 a year. She called about the little over $700,000 she has in a traditional IRA and whether to start moving it to a Roth, since this is the last year she can file jointly.
Once she told him she doesn’t need that money today, Dave Ramsey gave her the show’s standard advice: “don’t make decisions, big decisions, right in the middle of the tears.” He continued: “I would do nothing for a while, like six months or a year, nothing.”
She never mentioned a house. But for plenty of widows, selling the family home is the biggest decision on the list, and it comes with a federal tax deadline. So let’s say she owns the home she shared with her husband, and selling it would bring a $400,000 gain.
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A widow keeps the couple’s $500,000 for two years
Normally, someone selling a main home can exclude up to $250,000 of the gain from income, or up to $500,000 on a joint return with a spouse, as long as they’ve owned it and lived in it for at least 24 months of the last 5 years, according to the IRS. A surviving spouse can keep the bigger figure for a while. Under IRS Publication 523, a widow can still exclude up to $500,000 if she sells within 2 years of her spouse’s death and hasn’t remarried at the time of the sale. The ownership and use tests still apply, and neither spouse can have taken the exclusion on another home in the 2 years before.
Her husband died this year, so she has until the second anniversary of his death, in 2028, to sell at the $500,000 limit. Even if she does nothing for a full year, as Ramsey suggested, she’d still have about a year to decide on the house.
Selling late would cost her $22,500
Here’s the federal tax on that $400,000 gain, inside the 2-year window and after it:
| When she sells | Exclusion | Taxable gain | Federal tax at 15% |
|---|---|---|---|
| Within 2 years of the death | $500,000 | $0 | $0 |
| After 2 years | $250,000 | $150,000 | $22,500 |
Inside the window, the whole $400,000 falls under the $500,000 exclusion, so none of it is taxed. After it, she’s back to the $250,000 a single seller gets, and $150,000 of the gain is taxable. With a salary of about $250,000, she’s well past the 0% band. The extra $150,000 still keeps her under the line where 20% starts in 2026: $545,500 of taxable income for a single filer, and $579,600 for the head of household status she expects to claim. So the whole $150,000 is taxed at 15%, for $22,500.
That’s a lot of money to hand over for missing a date on the calendar. A big Roth conversion in the same year would also add to her taxable income. If she sold late in a year with a big conversion, part of the gain could land in the 20% band.
Take the year, then mark the date
The way I see it, Ramsey’s advice is exactly right here. Grief is a terrible time to sell a house, and a widow can hold off for up to two years without owing a dime more in federal tax on it. So I’d take the six months or the year he suggested, then put that two-year date on the calendar. If she decides to stay in the house for good, she can still sell someday with a single seller’s $250,000 exclusion. And if she remarries before a sale, she loses the $500,000 limit, whatever the date.
Of course, the $22,500 uses 2026’s rates. The IRS sets new breakpoints for each year, so a sale in 2028 would fall under that year’s.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
