Covered Call ETFs: High Yields Mask Complex Tax Liabilities for Retirees
Covered call ETFs like JEPI and JEPQ offer high monthly yields but carry significant tax risks. Distributions often include return of capital, which defers taxes but reduces cost basis, leading to higher capital gains upon sale. Advisors recommend holding these funds in tax-deferred accounts like IRAs to mitigate this impact. While yields are attractive, investors must evaluate the tax-cost ratio and net asset value growth to ensure long-term sustainability.