Two popular income funds, JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and Realty Income (O), incur higher taxes when held in taxable accounts due to their income types. JEPQ's distributions are mostly ordinary income, best held in a traditional IRA to avoid high taxes, while Realty Income's REIT distributions also favor tax-advantaged accounts despite some deduction nuances. Conversely, funds like Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard Dividend Appreciation ETF (VIG) pay qualified dividends that benefit from lower tax rates and are better kept in taxable accounts. Properly allocating these funds between taxable and tax-advantaged accounts can increase after-tax income without additional buying or selling.
