Perspectives Blog

Capture five tax benefits with a 529 college savings plan

Columbia Management, Investment Team | March 21, 2014

By contributing to a 529 plan, you may benefit from tax advantages — without giving up control of plan assets. As an estate planning tool, 529 plans may allow removal of significant assets from your taxable estate. Investment growth in a 529 plan, as well as distributions, is not subject to the new 3.8% net investment income surtax. Owning a home. A financially secure retirement. A college education for a child or grandchild. These are a…

Do you know what’s in your short-term bond fund?

Columbia Management, Investment Team | December 1, 2014

…storically, the agency mortgage-backed securities market has provided higher than average risk-adjusted returns. Taxes matter Keep in mind that many fixed-income strategies come in taxable and tax-exempt options. Investors in higher income tax brackets may want to consider a short-term municipal bond fund. These funds distribute income exempt from federal and/or state taxes, and the tax benefit can be significant. For example, for investors in th…

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

…lp investors keep more of what they earn, since the income may be exempt from local, state and/or federal income taxes. As tax rates move higher, investments that provide income exempt from taxes, such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield curve in 2013, as the yield on the 30-year AAA muni bond increased by 134 basis points, ending the year at 4.19%. While we expect rates…

Trust accounts and the net investment income tax

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

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 | November 18, 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…

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…

The coming divide in state credit quality

Ty Schoback, Senior Municipal Analyst | June 3, 2014

…revenues typically exhibit greater economic sensitivity than local governments due to greater reliance on income taxes. Since the end of the Great Recession, states have seen above average annual tax revenue growth, largely driven by robust equity market gains that have generated strong capital gains taxes. A number of states have managed such growth with exceptional prudence – states we deem to be fiscal leaders – and are now in the…