Would you consider yourself a proactive person or a reactive person? In other words, do you take action only when something forces your hand, or are you anticipating what might be around the next corner?
While most of us would like to say we’re proactive, the reality is we tend to be reactive in most situations. After all, as human beings, we are wired to follow the path of least resistance and will continue doing things the same way until someone or something forces us to change course. But what if we all approached our lives with a proactive spirit? What effect could that have on our relationships, our health, or our money?
We are currently in the thick of tax season. It is the “fifth season,” nestled between the coldest days of winter and the spring flowers. Tax season comes every year at the same time and, in general, ends at the same time, but for most people, taxes are still reactive. When it’s time to file your taxes, you file. If you are surprised by owing more tax than you want to pay, you might react by making a last-minute contribution to an IRA (Individual Retirement Account) or an HSA(Health Savings Account). While these can be good decisions at the time and can help you reduce your tax bill this year, they might not be the best for you and your financial priorities in the long run.
Tax planning is proactive. Tax filing is reactive.
Every decision that you make has a direct or indirect impact on the taxes that you or someone else is going to pay. When tax planning is part of the process year-round, it opens the door to more intentional decisions. This is especially important when new legislation creates planning opportunities. For example, here are two recent tax law changes that impacted many of our retired clients in 2025:
1. Deduction for Seniors
Individuals age 65 and older may claim an additional $6,000 deduction from 2025 through 2028. This new deduction is in addition to the existing standard deduction for seniors.
- Married couples where both spouses qualify may deduct up to $12,000 total.
- The deduction phases out for adjusted gross incomes over $75,000 ($150,000 for joint filers).
- Available whether you itemize or take the standard deduction.
- To qualify, you must be age 65 by the end of the tax year and include the appropriate Social Security information on your return
2. Wisconsin Retirement Income Subtraction
Up to $24,000 ($48,000 for certain joint filers) of qualified retirement income may be subtracted from Wisconsin income.
- Applies if you or your spouse (if filing jointly) were age 67 or older on December 31, 2025
This is where proactive planning makes a meaningful difference.
At North Point, we follow our True North Method to stay ahead of changes like these. Both updates came into law after we had already provided preliminary projections for 2025. Fortunately, they created additional opportunities for tax savings.
Because we plan proactively, we were able to revisit those projections and have timely conversations with clients before year-end. For some, this meant converting additional tax-deferred assets to a Roth IRA with minimal tax impact, which aligned with their goal of leaving more money tax-free to their children (and less to Uncle Sam). For others, it meant decreasing their withholding, so more of their money could remain invested and continue growing.
In either scenario, adjustments were able to be made prior to the end of year, which allowed for additional choices and flexibility, and no surprises. Compounding is powerful. Just as compounding affects your investments, small proactive decisions and adjustments can have an equally powerful impact.
