Author Topic: Are ETFs double-taxed?  (Read 3606 times)

catalysto

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Are ETFs double-taxed?
« on: February 08, 2014, 11:17:26 PM »
Quick question about ETFs. I currently own Vanguard VTI, VNQ, and BND, and it was recently suggested to me that these investments are "double-taxed". I was unable to get clarification, so can anyone else shine a light on this? I tried researching why ETFs might have higher taxes, and the only thing I could dig up was qualified vs. non-qualified dividends. It looks like VTI distributes 100% qualified dividends, but VNQ and BND do not. Could that be what the person was referring to? Would the mutual fund versions not have these tax issues?

I guess my real question is this: I originally started with the ETF versions of these funds because I didn't have the minimum for Admiral, but since I do now, is there any reason at all to go through the trouble of switching over to Admiral? Is there any particular way I should be handling the dividends aside from reinvesting them?

Thank you!

foobar

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Re: Are ETFs double-taxed?
« Reply #1 on: February 09, 2014, 12:11:54 PM »
I don't think REIT or bond income ever counts as qualified dividends. This doesn't have anything to do with ETF versus mutual fund.

ETF and mutual funds handle capital gains slightly differently. In general ETFs should be slightly more efficient but there have been some exceptions.

ETFs that hold MLP do suffer from double taxation (but you don't have to file a for, k-1?)

Quick question about ETFs. I currently own Vanguard VTI, VNQ, and BND, and it was recently suggested to me that these investments are "double-taxed". I was unable to get clarification, so can anyone else shine a light on this? I tried researching why ETFs might have higher taxes, and the only thing I could dig up was qualified vs. non-qualified dividends. It looks like VTI distributes 100% qualified dividends, but VNQ and BND do not. Could that be what the person was referring to? Would the mutual fund versions not have these tax issues?

I guess my real question is this: I originally started with the ETF versions of these funds because I didn't have the minimum for Admiral, but since I do now, is there any reason at all to go through the trouble of switching over to Admiral? Is there any particular way I should be handling the dividends aside from reinvesting them?

Thank you!

soccerluvof4

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Re: Are ETFs double-taxed?
« Reply #2 on: February 09, 2014, 01:15:04 PM »
you might want to switch to Index funds regardless now just to get the admiral shares. Check but as long as you stay in Vanguard i dont think there is a charge.

catalysto

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Re: Are ETFs double-taxed?
« Reply #3 on: February 09, 2014, 10:37:52 PM »
Thanks guys! So it seems taxes aren't really an issue between the two. Then is there any advantage to the Admiral over the ETF? They have the same expense ratio.

grantmeaname

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Re: Are ETFs double-taxed?
« Reply #4 on: February 11, 2014, 07:07:35 AM »
Then is there any advantage to the Admiral over the ETF? They have the same expense ratio.
Not really. They're pretty much equivalent.