Perspectives Blog

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

Higher earners with taxable investments are most susceptible to triggering the net investment income tax, a surtax of 3.8% that applies to taxable investments. An asset location strategy involves placing a greater percentage of the most tax-sensitive investments in tax-deferred accounts. Retirement plans offer significant opportunities for participants and business owners to reduce taxable income. In 2013, new taxes associated with the Afforda…

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

…014 Assumes S&P Main and S&P High Yield Indices for muni yields. Assumes the “HYM 10+ years” corporate index and broad IG corporate bond index (excluding financials).* Assumes a 2014 federal income tax rate of 43.4% (39.6% income tax rate + 3.8% Net Investment Income Tax rate). Other taxes are possible. The effect of potential federal income tax phase outs of personal exemptions and itemized deductions is excluded from this sc…

The role of asset location

Abram Claude, Vice President, Columbia Management Learning Center | October 23, 2013

…er the 15% income tax bracket, but below the 39.6% bracket, the long-term capital gains rate is 15% with taxable income. For those investors with taxable income in the 39.6% income tax bracket, the long-term capital gains rate is 20%. Long-term capital gains and qualified dividends are not the least tax-sensitive gains income, but they aren’t the most tax-sensitive either. The income from corporate bonds or other (federally) taxable fixed-income

The new tax regime and stock compensation

Abram Claude, Vice President, Columbia Management Learning Center | October 30, 2013

…one or more forms of stock option plans. Compensation income from stock incentives contributes to adjusted gross income, but not net investment income for purposes of calculating the new 3.8% tax on net investment income. The Columbia Management Learning Center is dedicating a series of blog articles to this important and timely “Navigating the New Tax Regime” topic. For many employees in corporate America, a portion of compensation comes from o…

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

…pts and restrained spending — justify tighter credit spreads, especially relative to more volatile taxable fixed income alternatives, such as high-yield and investment-grade corporate bonds. While rates may in fact move higher later this year, we believe that even in such an environment, municipal bond investors will enjoy higher after-tax total returns with the promise of relative outperformance compared to other fixed income investment options….

Trust accounts and the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | October 9, 2013

The 3.8% net investment income tax applies to certain trusts and estates. Given the lower income thresholds for reaching higher tax brackets in a trust, it is possible that income or capital gains retained by the trust will be taxed at higher rates than if the income or gains were distributed to beneficiaries. The Columbia Management Learning Center is dedicating a series of blog articles to this important and timely “Navigating the New Tax Reg…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…nicipal defaults is at its lowest level since at least 2009. With rising tax rates, the advantages of tax-exempt income can be considerable. Attractive yields vs. corporate and Treasury bonds, a historically steep yield curve, defaults at their lowest level since 2009, increasing tax revenues and high income tax rates make municipal bonds a compelling investment opportunity. Third quarter 2013 was a roller coaster for the municipal bond market,…