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Tax-Smart ETF Investing: BTCI, QQQI, or SPYI?

 Investing in income‑focused ETFs or futures‑based strategies in a taxable account means balancing two key considerations: how much you keep after taxes and how much you’ve earned. Here’s a deep dive into three popular tickers — QQQI, SPYI and BTCI — comparing their tax treatment side‑by‑side, then reviewing their performance profiles since each fund’s launch.

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Disclosure:
This article’s formatting has been assisted by AI tools.

1. Tax Efficiency: Section 1256 & Mark‑to‑Market

All three funds deploy derivatives (index options or Bitcoin futures) that the IRS classifies as Section 1256 contracts, triggering two big tax benefits:

  1. 60/40 Blended Capital Gains
    ­ • 60% of any gain is treated as long‑term (regardless of holding period), and 40% as short‑term.
    ­ • This often caps your net rate at ≈ 26.8% versus up to 37% on ordinary short‑term gains. (cboe.comturbotax.intuit.com)
  2. Annual Mark‑to‑Market
    ­ • All open positions are deemed sold at fair market value each December 31, reported on Form 6781 (no need to track each trade).
    ­ • Simplifies reporting, but accelerates recognition of gains/losses. (schwab.com)

Furthermore, none of these ETFs issue K‑1s (they all deliver 1099‑DIV/1099‑B), sparing investors the complexity of partnership tax filings.

2. Performance Snapshot (Through May 31, 2025)

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Why these metrics matter:

  • Annualized ITD paints a normalized picture across different launch dates.
  • The TTM CAGR for BTCI captures its most recent 12‑month performance — crucial for a young fund whose index (Bitcoin futures) can be volatile.

3. What It Means for Taxable Investors

  • Highest tax efficiency: All three are equally “efficient” in theory, leveraging Section 1256’s blended rates and mark‑to‑market simplicity.
  • BTCI leads on a recent 12‑month basis (24.98% CAGR), but futures roll costs and strategy shifts can add volatility.
  • QQQI’s strong 16.5% since‑launch is impressive for a covered‑call strategy on a growth‑heavy index.
  • SPYI delivers steady, broad‑market income (11.3% annualized) with the longest track record here.
  • Consider your horizon: If you prize consistency and Alpha generation via options, SPYI’s track record is compelling. If you want aggressive crypto‑linked returns (and can stomach the swings), BTCI may suit. QQQI sits between — tech‑focused income with robust early performance.

Final Thoughts

In a taxable account, tax mechanics alone won’t distinguish these three — they’re all optimized with 60/40 treatment and annual marking. Instead, let return profile, underlying asset exposure, and your risk tolerance guide the choice:

  • SPYI for broad U.S. equities income
  • QQQI for Nasdaq‑100 covered‑call income
  • BTCI for Bitcoin‑futures‑based growth

Whichever you pick, plan for mark‑to‑market events each December and keep those 1099s handy come tax season.

Disclaimer:
The content provided is for informational and entertainment purposes only and does not constitute financial, investment, or legal advice. Always do your own research or consult a qualified financial advisor before making any financial decisions. The author or publisher assumes no responsibility for any actions taken based on the information presented.

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