Key Takeaways
- A widow who sells her home within two years of her husband’s death, and hasn’t remarried, can exclude up to $500,000 of the gain, according to the IRS.
- If she remarries before the sale, her exclusion falls back to her own $250,000.
- On a $400,000 gain, that leaves $150,000 taxable, or $22,500 of federal tax at the 15% long-term rate.
- The fix is timing: close the sale before the wedding, and inside the two-year window.
A hypothetical 69-year-old widow lost her husband about a year ago. She has a $400,000 gain on the house they shared, she’s thinking about selling, and she’s engaged.
If she sells first, she can owe nothing on that gain. If she marries first, the same sale can cost her $22,500 in federal tax.
The two-year window
Taylor Schulte flagged the rule behind this on this week’s episode of the Stay Wealthy Retirement Podcast: “You may still qualify for the full $500,000 married filing jointly exclusion if you sell your home within two years of your spouse’s death, assuming the other eligibility requirements are met.”
The IRS lists those requirements in Publication 523. A surviving spouse can raise her exclusion from $250,000 to $500,000 if she sells within two years of her spouse’s death and hasn’t remarried at the time of the sale. The usual tests still apply. She needs two years of ownership and use, and neither spouse can have taken the exclusion on another home in the two years before the sale.
The remarriage condition is the one I’d circle in red, because Schulte’s line doesn’t mention it. Once she’s remarried, the surviving-spouse rule no longer applies. Her limit drops to the standard $250,000 that IRS Topic 701 gives a seller who has owned and lived in the home for at least 24 months of the last five years.
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What the wedding date costs
Here’s the same house sold in each order:
| Metric | Sells, then remarries | Remarries, then sells |
|---|---|---|
| Gain | $400,000 | $400,000 |
| Exclusion | $500,000 | $250,000 |
| Taxable gain | $0 | $150,000 |
| Federal tax at 15% | $0 | $22,500 |
If she sells first, the $500,000 limit covers the whole $400,000 gain with $100,000 to spare. If she marries first, $400,000 minus her $250,000 exclusion leaves $150,000 taxable.
That $150,000 is a long-term gain, and the rate depends on where it lands in taxable income. Under Rev. Proc. 2025-32, the IRS’s 2026 brackets for a joint return put the 0% rate on taxable income up to $98,900 and the 15% rate up to $613,700. Suppose she and her new husband file jointly, and their other taxable income is already above $98,900 but below $463,700. Then the whole gain falls in the 15% band, and $150,000 × 15% = $22,500.
With less income, part of the gain would be taxed at 0% and the bill would shrink. With more, part of it would cross into the 20% band.
The bill may not stop there
Schulte pointed out on the same episode that any taxable gain above the exclusion can “push you into a higher capital gains tax bracket, trigger the additional 3.8% net investment income tax, and even increase your Medicare premiums two years later, all from a single transaction.”
So the $22,500 is the floor of what remarrying first could cost her. A retiree’s Medicare premiums are part of the bill too.
Close first, then the wedding
The order matters most. The sale has to be done while she’s still unmarried and within two years of her husband’s death. The two-year clock runs from the date of death, and the remarriage test looks at the date of the sale. Remarrying after the sale doesn’t take the exclusion back.
The other tests matter as well: the ownership and use requirements, and no exclusion taken on another home in the two years before. If either fails, the $500,000 is off the table no matter when the wedding is.
If some of the gain will be taxed, she can still make it smaller. Schulte noted that qualifying improvements and selling expenses can reduce a taxable gain, and he suggested keeping good records of the improvements that raise the home’s cost basis. He also suggested timing the sale around Roth conversions and other taxable income, which affects how much of a gain lands at 0% instead of 15%.
Two years is a short window, and plenty of widows won’t remarry within it. For the ones who do, the order of two dates is worth $22,500.
My take: if a wedding and a sale are both on the calendar, the sale goes first. A closing date is a lot easier to move than a tax bill.
The answer does change with time. Once two years have passed since her husband’s death, the surviving-spouse limit is gone either way. And a sale next year would fall under 2027’s rate brackets, which the IRS sets separately from the 2026 figures above.
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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!
