Investors who access leveraged/inverse commodity ETF strategies will also incur different tax consequences, since the ETFs utilize swaps and options to implement their leverage/inverse strategies. Interest income from the cash pool is taxed as ordinary income, gains are taxed as short-term capital gains and investors will have to pay taxes annually, even if you are still holding the fund into the new year. [What is an ETF? — Part 16: Inverse and Leverage Funds]
Lastly, equity-based commodity producer ETFs, much like normal equities and stock ETFs, are taxed when a position is sold, with the current 15% maximum rate on long-term gains and ordinary income on short-term gains of up to 35%.
Of course, we are not accountants and investors should still consult their tax experts.
For past stories in this series, visit our “What is an ETF?” category.
Max Chen contributed to this article.
