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ETF Tips as the Tax Deadline Looms

tlydon@globaltrend.com (Tom Lydon)

With the April tax deadline only a few days away, it’s a good time to recap ETFs’ tax efficiency benefits as well as tips investors should keep in mind.

As ETF products now cover a wide range of asset classes, various funds may come with different tax consequences.

Although stock ETFs are known for their tax efficiency relative to traditional mutual funds, certain ETFs tracking other asset classes such as gold have tax wrinkles. [ETFs During the Tax Season: What to Expect]

Since the IRS treats precious metals as collectibles, long-term gains on bullion-backed ETFs can be taxed at a higher 28% rate.

Additionally, ETFs that track commodity futures contracts and currency ETFs can also be taxed at different rates. There are also differences between ETFs and exchange traded notes, or ETNs. [Commodity ETFs’ Tax Considerations]