Perspectives Blog

New taxes require strategies to maximize after-tax return

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

…rginal income tax rate. For high earners, this could be 33% or 35%. On the other hand, many investors pay tax on income from qualified stock dividends at a far lower 15% long-term capital gains tax rate. Even investors in the highest income tax bracket of 39.6% face a lower long-term capital gains rate of 20%. Given the significant differential in tax treatment, it could make sense to place more taxable fixed-income securities in a tax-deferred a…

The role of income inequality

March 3, 2014

…ial crisis and the slow post-recovery period can be traced to many factors, but a predominant one is the rise in income inequality. What is not generally known is that this is not a new or recent development—income inequality for both wages and earnings in the U.S. (and other advanced economies) began to rise starting in the 1980s. The income share of the top 5% in the U.S. income distribution was a fairly constant 20% from 1960 to 1980, with inc…

The taxman cometh

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

…higher tax brackets can receive a greater tax benefit than those in lower tax brackets. Municipal bonds provide income exempt from federal and, in some cases, state income taxes. Sticker shock: Non-municipal fixed income investors may face much higher levies High net worth investors may be in for a shock once they determine their 2013 tax bill. This is due to the higher federal income tax rate and the NIIT that was enacted to cover some of the c…

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

What is the Net Investment Income Tax, and how is it calculated?

Abram Claude, Vice President, Columbia Management Learning Center | September 18, 2013

The Net Investment Income Tax is a new, permanent tax that is effective beginning in 2013. Investors who break a certain modified adjusted gross income threshold may face a 3.8% surtax. This tax is in addition to any ordinary income or long-term capital gains tax obligations. The Columbia Management Learning Center is dedicating a series of blog articles to this important and timely “Navigating the New Tax Regime” topic. The net investment inc…

Should your income be fixed?

David King, CFA, Senior Portfolio Manager | December 16, 2013

Investors need to rethink the role of fixed income in building portfolios How to provide an adequate rate of return with an acceptable level of risk Benefits of a non-fixed, income-oriented strategy in today’s environment Peanut butter and jelly. Bacon and eggs. Scotch and soda. In the investment industry, the words “fixed” and “income” seem as inseparable as our favorite food and beverage combinations. Something which has served millions of p…

Does it still pay to hold municipal bonds?

Anders Myhran, Municipal Portfolio Manager | July 29, 2014

…ce of a bond or bond fund, there seems to be little or no recognition of the shock-absorbing effects of a bond’s income component. Don’t forget the income in fixed income Risk, and the fear it often instills, can cloud investors into thinking only about the here and now. Fixed income investing is a balancing act between the shorter-term (price volatility) and the longer-term (income). The short term is often driven by changes in interest rates an…