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 role of asset location

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

…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 does it count under net investment income — two of the components investors use under the new 3.8% tax regime to determine their exposure. Or consider the income fro…

The taxman cometh

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

…t of 2012 and the introduction of taxes associated with the Affordable Care Act (ACA) of 2010 (Obamacare). These new and higher levies 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 Inco…

Trust accounts and the net investment income tax

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

…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 Regime” topic. The 3.8% net investment income tax (NIIT) does no…

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 new tax regime and stock compensation

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

…in corporate America, a portion of compensation comes from 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 i…

Strategies for business owners to reduce net investment income tax

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

…ute as much as $51,000 to his business’s SEP IRA plan. Of course, investors should always consult their personal tax advisors and/or legal counsel before making any investment or financial planning decisions. Related reading: Retirement plan design for the new tax regime Next in this series: Trust accounts and net investment income tax What you may have missed: Maximizing workplace retirement plans to reduce or eliminate the net investment inc…