Perspectives Blog

Trust accounts and the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | November 13, 2014

…taxable and tax-exempt income, (for instance tax-exempt income from municipal securities would not be subject to taxation in a trust), and they are eligible to deduct certain expenses. They are also allowed a small exemption amount. The amount depends on the type of trust, but they are not eligible for a standard deduction. One key difference between trust and individual taxation is the “compression” of income tax brackets applied to a trust comp…

The role of asset location

Abram Claude, Vice President, Columbia Management Learning Center | November 14, 2014

Financial advisors and investors should have a good understanding of what is different about taxation in 2013 and beyond – and how it affects after-tax returns. An asset location strategy should consider the benefits of placing less tax-favored investments under tax-deferred or tax-free registrations in order to increase after-tax returns. The Columbia Management Learning Center is dedicating a series of blog articles to this important and time…

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…

Inversions and the growing scrutiny of corporate tax avoidance

Walter Colsman, Senior Equity Analyst | September 29, 2014

While inversions are not new, the pace of inversions has rapidly increased in the last few years. We believe the debate over tax policy and perceived corporate tax avoidance will only grow from here. Investors should be cautious about companies that have taken aggressive tax stances. U.S. corporate tax rates are among the world’s highest (Exhibit 1) and current tax code calls for the taxation of all profits earned by U.S. companies, including…

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

Why invest in long-term muni bonds? Why investors should focus on tax-free income and total return Many investors fled the muni market in 2013, as $60 billion in mutual fund redemptions attests. Particularly hard hit were longer-maturity funds, likely due to investors anticipating higher interest rates and the negative impact that would have on fixed-income investments, especially longer bonds. While such concerns appear rational, is avoiding…

The new tax regime and stock compensation

Abram Claude, Vice President, Columbia Management Learning Center | November 15, 2014

For many employees in corporate America, a portion of compensation comes from one or more forms of stock plans or 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…

Maximizing workplace retirement plans to reduce or eliminate the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | November 6, 2014

The net investment income tax (NIIT) is a new, permanent tax that began in 2013. Investors’ workplace retirement plans, such as 401(k) plans, may offer several opportunities to reduce exposure to the tax. The Columbia Management Learning Center is dedicating a series of blog articles to this important and timely “Navigating the New Tax Regime” topic. Many higher-income investors with taxable investments encountered a new tax that began 2013: t…