Are the biggest life insurance opportunities hiding during tax season?

Every year, tax season arrives with a familiar rhythm: gather the documents, crunch the numbers and file the returns. Although tax season is usually focused on the prior year, it offers life insurance professionals a powerful yet underused window for proactive planning.

The best planning insights might be sitting right in front of you on your client’s Form 1040. The tax return is more than a compliance document; it is both a diagnostic tool and a snapshot into your client’s financial life. Carefully reviewing your client’s Form 1040 can uncover needs related to income replacement, retirement readiness, legacy goals, long-term care, business planning and more.

This year, with the One Big Beautiful Bill Act creating the possibility of larger federal tax refunds for some taxpayers, clients may be more receptive than ever to these planning conversations. Use of these larger refunds may represent additional opportunities.

The 1040 can uncover planning opportunities that reveal unmet needs, spark deeper client conversations and shift tax time from a reactive moment into proactive, year‑round planning.

 Filing status: Life changes that signal planning gaps

The top of page 1 of the 1040 may seem basic, but filing status tells one of the most essential stories. For example, a newly married couple may have combined finances for the first time. A recently divorced taxpayer may need insurance to secure alimony obligations. Head‑of‑household filers often have dependents relying on their income. Filing-status changes often prompt a review of protection needs or legacy planning considerations.

Act now:

• Confirm whether life changes have triggered increased protection needs.
• Review beneficiary designations, especially in the case of marriage, divorce, death, birth or adoption.
• Discuss the need for income replacement or wealth equalization for blended families.

Dependents

Clients often think dependents change only when a new baby arrives. But dependents can also reflect elderly parents now under the clients’ care, a spouse’s children in a blended family or special‑needs dependents requiring lifetime planning.

Each of these can point to potential LTC, income replacement or estate planning conversations.

Act now:

• Ask what would happen financially if the wage earner became ill or passed away.
• Start a conversation on LTC if clients are already caregiving for someone else.

Line 1 (wages): Income replacement and spousal needs

Wages may be the simplest number on the return, but they quickly show how much income clients would need to replace after death or disability. You may also identify stay-at-home spouses who may have significant economic value despite lacking earned income.

Act now:

• Perform a needs analysis using current income figures.
• Review the economic value of a nonworking spouse, including how their loss would create new costs such as childcare and household management.
• Connect income replacement to broader protection and legacy goals.

Lines 2–3: Interest and dividends

Taxable interest and dividends often represent conservative, low-yield holdings such as certificates of deposit, money market accounts, savings accounts or taxable investments producing ordinary income. Clients with significant amounts on these lines may be ideal candidates to reposition into more tax-efficient solutions, such as permanent life insurance with tax-advantaged cash value access.

Act now:

• Ask clients about the purpose of these assets.
• Use interest and dividend data to discuss tax diversification.

Lines 4–6: Individual retirement account, pension and Social Security distributions

If clients are already taking distributions, they’re either retired, forced to take required minimum distributions they don’t need, or using their retirement savings earlier than planned. All three situations can signal planning opportunities around LTC needs and legacy planning.

Act now:

• Ask whether distributions are truly needed for income.
• Introduce the idea of repositioning unneeded distributions into tax-efficient strategies.
• If the clients are retired, discuss LTC and estate goals.

Line 7: Capital gains

Significant capital gains often indicate concentrated stock positions, real estate sales or passive investment turnover. Clients focused on legacy goals may be better served by repositioning highly taxable or volatile assets into tax-advantaged tools such as life insurance.

Act now:

• Ask whether gains are part of ongoing investment activity or one-time events.
• Explore whether the clients want these assets to pass to descendants.
• Discuss the 3.8% net investment income tax for high earners.

Schedule 1: Business activities, rentals and retirement contributions

Schedule 1 is a treasure trove of additional information on your clients’ financial picture. For example, business income may open the door to conversations on a multitude of business planning needs, including buy-sell needs, key person and executive benefit opportunities.

Additionally, rental income may point to estate liquidity issues or unequal asset distribution among descendants, opening the door for discussions about asset transition and estate equalization.

Act now:

• For business owners, discuss whether they have a buy-sell plan, and if so, if it is funded and has been recently reviewed.
• Review whether key person insurance is in place.
• Use rental income to discuss liquidity needs and equalization strategies.

Schedule A: Charitable giving

With doubled standard deductions now permanent under the OBBBA, fewer clients itemize deductions. Therefore, taxpayers with itemized deductions, reflected on Schedule A, often have significant charitable intent, large mortgages, or high state and local taxes (limited by the SALT cap of $40,000 for 2025 and subject to phase-out amounts).

For example, charitable giving is a natural segue to conversations around wealth replacement strategies and leveraging life insurance to amplify impact.

Act now:

• Discuss using life insurance to boost charitable legacies.
• Review mortgage balances versus existing coverage.
• Explore tax diversification when SALT deductions are limited.

OBBBA refunds: The perfect conversation starter

Many clients may receive unexpectedly large refunds due to the OBBBA. Even though these refunds represent income withheld during the year and are being returned, for many clients, it feels like “found money,” which often makes them more receptive to planning recommendations.

Act now:

• Suggest directing refunds toward protection gaps, LTC funding or supplemental savings.

• Use the refund as a springboard to holistic planning conversations and forward-looking strategy.

Tax season doesn’t have to be a once-a-year administrative chore. With the right mindset, it can become a valuable annual prospecting and planning opportunity. The 1040 is rich with clues around life changes, income patterns, asset allocations, deductions, distributions and more. This window into your clients’ financial life opens the door to conversations clients should be having but rarely initiate.

This year, especially with OBBBA-related refunds creating additional talking points, leading with a proactive 1040-based analysis will help deliver greater client value and spark meaningful conversations to protect your clients’ financial future.

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Carly Brooks is senior vice president and head of advanced sales at Crump Life Insurance Services, an AmeriLife company. Contact her at [email protected].