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

…a single tax filer, she would not reach that long-term capital gains rate until she exceeded $400,000 in taxable income in 2013. 2013 estate and trust income tax brackets Next in this series: Asset allocation and asset location: How both contribute to after-tax return Asset location: Its role in after-tax return and retirement planning What you may have missed: Strategies for business owners to reduce net investment income tax Retirement plan…

The role of asset location

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

…diminishing the value in the more distant future. Since interest from taxable fixed-income is taxed at ordinary income rates, as are taxable distributions from IRAs and qualified plans, the benefit of tax-deferred growth while in the IRA may be attractive. Plus, distributions from IRAs and qualified retirement plans are not included under net investment income, and since the net investment income tax applies to the lesser of the amount over a tr…

The taxman cometh

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

…re investment that remains completely free from federal taxes, including the new NIIT. All other (non-municipal) income not sheltered in qualified retirement accounts will count toward the adjusted gross income threshold for calculating the NIIT tax ($400,000 for individuals and $450,000 for couples filing jointly) and will be subject to the new 3.8% NIIT levy. These new and higher taxes amplify the investment case for including municipal bonds i…

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

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

…d, or if they do cross the threshold, there are steps that could mitigate the degree to which the net investment income tax applies. In our next installment of the series, we will begin to examine some of those steps. Next week in this series: The power of the workplace in lowering modified adjusted gross income, net investment income or both Maximizing workplace retirement plans to reduce or eliminate the net investment income tax What you may…

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…

The new tax regime and stock compensation

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

…t. Any short- or long-term capital gains, and any dividends from the stock, will count under both adjusted gross income and as net investment income. What you may have missed: The role of asset location Trust accounts and the net investment income tax Strategies for business owners to reduce net investment income tax Retirement plan design for the new tax regime Maximizing workplace retirement plans to reduce or eliminate the net investment inc…