The Individual Investor’s Guide to Personal Tax Planning 2013 — Updated

The Individual Investor’s Guide To Personal Tax Planning 2013 Splash image

This article has been updated to reflect that the projected 2014 tax rates have been confirmed by the IRS as of January 6, 2014.

The American Taxpayer Relief Act of 2012 (ATRA), signed into law at the start of 2013, simplified planning for the current tax year.

Following the uncertainty that existed at the end of 2012, this clarity was a welcome change. The revisions covered most of the tax code as it applies to individuals. Since the comprehensive legislation was passed in early January 2013, there has been little additional change beyond extending to married same-sex couples the same treatment as common-law married couples under the tax code.

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We cover the changes included in the ATRA as they apply to 2013 and 2014 in this guide. We also cover the tax changes included in the Affordable Care Act. A higher floor for deducting medical expenses went into effect this year for those under the age 65. High income earners face two new Medicare taxes.

Those who like to file early will have to wait an extra 10 days. The Internal Revenue Service (IRS) is delaying the starting date for when returns will be processed to January 31 because of the partial government shutdown. The deadline for filing a return or claiming an extension will remain April 15, however.

For 2014, several tax breaks, including the exclusion from gross income of qualified charitable contributions made from a traditional individual retirement account (IRA), expired on December 31, 2013.

Several line item numbers, including the standard deduction and mileage deductions for 2014 were announced in late December by the Internal Revenue Service. This delay was due to the partial federal government shutdown. We have updated these tax figures here.

Regardless of changes made to the tax laws, one thing is constant—you still have to pay taxes. Furthermore, even a simplified tax code is still likely to be too complex; hence the need for tax guides. As has been the case in years past, our tax guide provides an overview of the tax rates and deductions likely to impact the majority of AAII members. Since there are many details, loopholes and pitfalls within the tax code, it is impossible for this guide to provide enough details to cover specific tax situations. If you have questions, consult a tax professional. It is your tax return, and the IRS will hold you responsible for any errors made on it.

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Susan Crabtree from OH posted over 3 years ago:

In the ESTATE TAX section, there is a typo saying for 2014 the total effective exclusion would be $10.68 billion - believe that should be Million.

Richard Shaw from IL posted over 3 years ago:

I have opened the Tax Forecasting PDF on the webpage and it will not accept number input. Same result when downloaded the PDF. Also same result in both IE and Firefox.

Edward Kaminski from IN posted over 3 years ago:

I opened the Tax Forecasting PDF and it would not accept a number on line 1 of column 2013, however, it did accept the amount on line 1 of column 2014.

Richard Shaw from IL posted over 3 years ago:

Yes, it is line 1 in the 2013 column that is a problem. Also note the file does not calculate the tax for you, so not much of a tool for me.

Charles Rotblut from IL posted over 3 years ago:

Hi Susan,

The estate tax exemption for 2014 is $10.68 million. We've fixed the typo above, and apologize for the error.


Joseph Krauss from PA posted over 2 years ago:

What is the added deduction for over 65 years old. We take the standard deduction and both of us are over 65 years old. Standard deduction is $12400. What will the total be with the 65 plus added?

Lester Smith from MI posted over 2 years ago:

What is the amount an 89 yearold (male widower) with no w-2 income, allowed to transfer from a taxable brokerage account to an established IRA or Roth IRA?

Charles Rotblut from IL posted over 2 years ago:


IRS Publication 590 says:

You can open and make contributions to a traditional IRA if:
You (or, if you file a joint return, your spouse) received
taxable compensation during the year, and
You were not age 70-1/2 by the end of the year

Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI is less than:
$183,000 for married filing jointly or qualifying widow(er),
$125,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and $10,000 for married filing separately and you lived with your spouse at any time during the year.

Contributions can be made to your Roth IRA regardless of your age.


Charles Rotblut from IL posted over 2 years ago:


The additional standard deduction for 65 pr older is estimated to be $1,200 for married and $1,500 for single in 2014.


Milo Gwosden from CA posted over 2 years ago:

You say in the section "Estate and Gift Tax Limits" that one must file Form 709 if one person makes a gift for more than $14,000, $28,000 for married couples. Has the law changed? Previously gift tax returns for the annual gift tax exclusion did not require reporting the gift to the IRS if your gift did not exceed the statutory limits. In 2013 the limits are $14,000 and $28,000 respectively.

Peter Hansen from O vérselas posted over 2 years ago:

The only schedule A deducción that carriles though to the AMT is the charitable deduction. I realized this only after two years of being caught by the AMT.

Articles discussing conversion of a traditional IRA to a Roth never mention that any taxable contributions to the Traditional IRA, ie contributions made during years when income was above the tax deduction threshold, is considered part of your basis and is not taxable in the conversion basis.

Daniel from NC posted over 2 years ago:

The Tax Forecasting Worksheet isn't working as expected The PDF form doesn't total or calculate taxes. Can you review and respond with more detailed instructions? It probably should have been an Excel sheet which anybody could fix.

Robert Chace from WA posted over 2 years ago:

Your planning article is very well done, indeed! By its nature, it needs to be brief and cannot cover all circumstances. There were no comments that would apply to a small business - like an asset expensing election, purchasing a business auto, etc. Also, you should have invited the readers to engage a tax expert once they thought they got a handle on the subject. Consider an enrolled agent or a CPA. Thanks for your article. Robert Chace, CPA, ABV, CGMA

Kasturi from AZ posted over 2 years ago:

"*The Social Security Administration defines combined income as: Your adjusted gross income + nontaxable interest + ½ of your Social Security benefits." at the end of the table titled How much of SS income is taxed.

Could this be error? AGI which is line 37 or 38 (take your pick) is line 15 less line 36 includes the portion of SS income that is taxable.

Charles Rotblut from IL posted over 2 years ago:

Hi Kasturi,

The explanation of how Social Security Benefits are taxed comes directly from the Social Security Administration's website:


V.L. Genez from SC posted over 2 years ago:


The SSA website is not clear on the correct definition of adjusted gross income that is used to determine how much of your SSA benefit is taxable.

"Adjusted gross income" is total income on line 22 of Form 1040, less the amount of your taxable SSA income reported on line 20b. This procedure is in the IRS instructions for Form 1040.

Vic Genez

V.L. Genez from SC posted over 2 years ago:


When Charles Rotblut replied to your question about contributing to a Roth IRA, he did not define "taxable compensation."

In order to contribute to any IRA, you must have earned income equal to or greater than the amount of your contribution. Earned income is either W-2 income or self-employment income. If you do not have either of these, you would generally not be able to make an IRA contribution.

Vic Genez

David Scanlon from MA posted over 2 years ago:

Agree with other comments the tax worksheet has no functionality other than an outline for doing an estimate by hand. Please let us know when it works. Thanks.

Howard Buss from FL posted over 2 years ago:

When will the worksheet be able to the tax calculation?

Jerry Wyatt from NC posted over 2 years ago:

Greetings - Same question as others: Should we expect the worksheet to co the calculations? Otherwise, this article is a good overview.
Thank you.
Jerry Wyatt

Claude Paquin from GA posted over 2 years ago:

The various amounts to be used in tax computations and said to be "projected" ceased to be projected and became actual when the IRS published Internal Revenue Bulletin 2013-47 on Nov. 18, 2013. These amounts appear in Revenue Procedure (Rev. Proc.) 2013-35. AAII got those right.

The Internal Revenue Bulletin is a public document, published weekly, which can be accessed by going to this will produce a list of weekly IRBs in reverse chronological order, and each one can be downloaded and examined.

The 2014 standard mileage deductions published by AAII turned out to be incorrect. The correct (official) ones were published in Internal Revenue Bulletin 2013-52 on Dec. 23, 2013, and are 56.0 cents for business, 23.5 cents for medical/moving, and the statutory 14 cents for charity.

Now that everyone knows where and how to get these official figures, there should be no need for guessing or using second-hand sources.

Claude Y. Paquin, Fayetteville, GA

Jean Henrich from AAII posted over 2 years ago:

The Tax Forecasting Worksheet will do calculations when opened using Microsoft Internet Explorer and Google Chrome browsers. For some unexplained reason, it does not work with the Mozilla Firefox browser. We apologize for this inconvenience. Please go to using Internet Explorer or Chrome as your Internet browser and then click on the Tax Forecasting Worksheet PDF. You should be able to enter numbers and see calculations.
--Jean, AAII

George Ross from VA posted over 2 years ago:

Like others I am having similar problems of the Forecasting Worksheet not accepting entries.

George Ross from VA posted over 2 years ago:

Very frustrating to try to enter data in the spaces provided on the Tax Forecasting Worksheet which for some reason does not accept the data. I have resorted to just printing a copy of the tax forecasting worksheet which I will use to pencil in my data...great tool. If any one has a solution to this problem I would appreciate hearingfrom you. Thanks

George Farinelli from Texas posted over 2 years ago:

Can you deduct the management fees for a 401K plan that was coverted to an IRA investment portfolio after retirement. I understand that it would only be the amount that exceeded 2% of your AGI. My confusion is that it has to be from taxable investments. The funds will be taxed in the future to the extent of the distributions taken which would be the minimum of the RMD.

Jean Henrich from IL posted over 2 years ago:

George - are you using Firefox or Google Chrome as your browser when opening the Tax Forecasting Worksheet?
--Jean from AAII

V.L. Genez from SC posted over 2 years ago:

I recommend you add the following items to the tax planning tables that appear in the annual guide to personal tax planning. They are necessary to determine an individual's AMT exposure, and they are subject to annual COLAs:

2014 AMT Exemption - AGI Phase-out level
MFJ - $156,500
S - $117,300
MFS - $78,250
HH - $117,300

2014 Tax Rates
Alternative Minimum Tax
AMT taxable income - AMT tax
$0 - $182,500 - 26%
Over $182,500 - $47,450 + 28% of the amount over $182,500
AMT taxable income - AMT tax
$0 - $91,250 - 26%
Over $91,250 - $23,725 + 28% of the amount over $91,250

JCE from NJ posted over 2 years ago:

AMT Credit question.

I have an amt carryover which netted an amt credit this year. Amt carryover remains into the next tax year.

Can you please add an explanation of how the Amt carryover/credit system works and how to estimate the expected credit for the following year so that withholding can be set appropriately?

Charles Rotblut from IL posted over 2 years ago:


I would suggest reading the IRS' instructions for Form 8801.


JCE from NJ posted over 2 years ago:


Yes, I am aware of that form. I was hoping that there was some clearer explanation - that form is pretty arcane.

Also,, some explanation of strategies to maximize the benefits of AMT carryover.: I.e. Given a carryover are there effective strategies to maximize the benefits?

Are there any references you could cite?


Charles Rotblut from IL posted over 2 years ago:


I would suggest contacting a tax professional to ensure you get the correct advice, given the complexity of the AMT.


JCE from NJ posted over 2 years ago:

FYI for others interested, I found some very good articles on the AMT credit on

Fred Gerbracht from CA posted over 2 years ago:

Has anyone else noted the references to the current tax year?
It is April 15, 2014 and stuff must have been done by the end of Dec 2013.

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