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 asset location

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

…n strategy that considers the benefits of placing less tax-favored investments under tax-deferred or tax-free registrations 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 conti…

The taxman cometh

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

…ntroduction 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 Income Tax (NIIT) of 3….

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…

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

For many employees 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….