Currency ETFs. Currency ETFs come three forms: ETFs that are structured as open-end funds fall under the ’40 Act Funds are taxed at a 15% maximum long-term rate and a 35% maximum short-term rate. Currency ETFs structured as grantor trusts, like precious metals ETFs, will always be taxed as ordinary income with a maximum 35% rate. ETFs structured as limited partnerships will require K-1 statements and follow a 60/40 long-/short-term gains treatment.
Exchange Traded Notes. ETNs are taxed similarly as their ETF equivalents – 15% maximum long-term gains and 35% maximum short-term gains. ETNs, though, don’t distribute income or capital gains. Commodity ETNs are also taxed like stock and bond ETNs, with the normal 15% long-term and 35% short-term gains. However, the IRS taxes all currency ETNs as ordinary income at a maximum rate of 35%, regardless of how long it is held.
For more information on ETFs and taxes, visit our taxes category.
Max Chen contributed to this article.
Story updated to correct the spelling of a source’s name, Michael Iachini.