SPYI ETF's 12% payout is mostly return of capital, deferring taxes until shares are sold or inherited.
The NEOS S&P 500 High Income ETF (SPYI) offers a 12% monthly distribution, but about 96-97% of these payments are classified as return of capital, not taxable income. This means investors receive a refund of their investment principal, which reduces their cost basis and defers taxes until they sell the shares or the basis hits zero. Older investors holding SPYI in taxable accounts and planning to leave shares to heirs benefit most, as heirs get a stepped-up cost basis that can eliminate deferred gains. Younger investors or those without estate plans may face larger tax bills later. Consulting a tax professional is advised before investing for estate planning purposes.
The NEOS S&P 500 High Income ETF (SPYI) offers a 12% monthly distribution, but about 96-97% of these payments are classified as return of capital, not taxable income. This means investors receive a refund of their investment principal, which reduces their cost basis and defers taxes until they sell the shares or the basis hits zero. Older investors holding SPYI in taxable accounts and planning to leave shares to heirs benefit most, as heirs get a stepped-up cost basis that can eliminate deferred gains. Younger investors or those without estate plans may face larger tax bills later. Consulting a tax professional is advised before investing for estate planning purposes.
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