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…

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…

The role of income inequality

March 3, 2014

The rise in income inequality was a root cause of the U.S. financial crisis and the slow post-recovery period. Mediocre income gains for middle income households have contributed to the slow recovery of U.S. consumption and economic growth. As pressure continues to build to address income inequality, we expect the government to lead on this issue and private sector to lag. By Marie Schofield, Chief Economist and Toby Nangle, Head of Multi asse…

The taxman cometh

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

…es are likely to cause real pain to taxpayers as they deal with potentially much larger tax bills, even if their income remained stagnant year-over-year. The two major sources of the increased pain emanate from the increase in the top federal income tax bracket from 35.0% to 39.6% and from the new Net Investment Income Tax (NIIT) of 3.8% which was enacted as part of the Affordable Care Act. The NIIT is a particularly unpleasant and unexpected sur…

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…

The role of asset location

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

…istrations in order to increase after-tax returns. This strategy could be particularly effective with respect to income producing investments, once you consider the range of tax treatments. For example, take municipal security interest, which was left unchanged by the American Taxpayer Relief Act of 2012 and, therefore, generally continues to be federally tax-exempt. The tax-exempt interest neither counts under modified adjusted gross income nor…

Strategies for business owners to reduce net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | October 2, 2013

Self-employment income may be included in an individual’s net investment income, or may raise modified adjusted gross income beyond the net investment income threshold. Business owners may be able to reduce exposure to the net investment income tax by establishing a qualified retirement plan, and characterizing a portion of business earnings as pretax contributions to the plan. The Columbia Management Learning Center is dedicating a series of b…