Retirees relying on the JPMorgan Equity Premium Income ETF (JEPI) for monthly income may face tax challenges due to a $12,000 senior deduction phase-out starting at $150,000 modified adjusted gross income (MAGI). JEPI's distributions are mostly ordinary income, which can push retirees' MAGI over this threshold, reducing their senior deduction. Alternatives like the NEOS S&P 500 High Income ETF (SPYI) and Nasdaq-100 High Income ETF (QQQI) use index options taxed more favorably under Section 1256, resulting in lower MAGI impact and similar monthly payouts. However, these alternatives may cap upside potential and involve return-of-capital distributions that defer taxes. Retirees close to the MAGI limit holding JEPI in taxable accounts might consider swapping to these options-income ETFs to optimize tax outcomes, ideally within tax-advantaged accounts to avoid triggering gains.
Covered-call ETFs offering 8%+ yields generate mostly non-qualified income taxed at ordinary rates in taxable accounts, reducing net returns. Holding four specific ETFs—SPYI, JEPI, JEPQ, and DIVO—in a Roth IRA shields investors from these taxes, pres...
The NEOS S&P 500 High Income ETF (SPYI) offers a headline yield near 12%, but about 95% of its payouts this year are return of capital, meaning investors are getting back their own principal rather than income. SPYI charges a high 0.68% fee compared ...
