# Tax-aware fund choice > Two Nasdaq-100 income ETFs, two structures, two tax results. See how notes, index options and return of capital change your tax, with real filings. Data as of Nov 10, 2026. Rebuilt every trading night. ## Tax-aware fund choice: how a fund's build shapes your tax Data as of Nov 10, 2026. Rebuilt every trading night. On $10,000 over the year to Nov 10, 2026 , JEPQ paid $1,182 and QQQI $1,383 , yet QQQI's fiscal year to Dec 31, 2025 was 99.6% return of capital. Planning Deep Dive · Lesson 2 of 6 1 2 3 4 5 6 Pick an amount. See each fund's cash, and the tax it adds now and at sale. Amount you put in $10,000 On $10,000: JEPQ cash paid $1,182, JEPQ tax now $284, QQQI cash paid $1,383, QQQI tax now $1, QQQI tax at sale $207. Hypothetical amount and hypothetical rates (24% ordinary, 15% long-term). One-year cash to Nov 10, 2026; splits from each fund's latest annual report. Step 1. Cash paid. JEPQ: $10,000 × 11.82% = $1,182 QQQI: $10,000 × 13.83% = $1,383 Step 2. Split by kind. JEPQ: 100% ordinary income, all $1,182 . QQQI: 0.4% ordinary income ( $6 ) and 99.6% return of capital ( $1,377 ). Step 3. Tax this year. JEPQ: $1,182 × 24% = $284 . QQQI: $6 × 24% = about $1 . The $1,377 lowers your basis: $10,000 − $1,377 = $8,623 . Step 4. Tax later. The lower basis makes your gain at sale $1,377 bigger, or your loss smaller. Held over a year: $1,377 × 15% = about $207 , paid when you sell. ### The question "Two funds do the same job on the same index. Can the way each is built change what I owe in tax?" ### The idea - Yes. How a fund earns its income decides the kind of payout you get ( Taxes in plain words ). In a taxable account, the kind decides when and at what rate you're taxed. - Two builds, same goal: - Notes: bank contracts that pay like options. Their income usually reaches you as ordinary income , taxed this year at your wage rate. - Index options: options on the index itself, Section 1256 contracts ( Taxable or tax-advantaged ). Payout beyond the fund's taxable earnings is return of capital : not taxed now, but it lowers your cost basis (what you're counted as having paid), so it's taxed when you sell. ### Worked example The 4 steps beside the drawing at the top work this through on ETFIQ data. Point at a step to light the part of the drawing it describes. Two Nasdaq-100 income funds, payouts over the year to Nov 10, 2026 . Each split is from the fund's latest annual report, for an earlier period (JEPQ's to Jun 30, 2026 , QQQI's to Dec 31, 2025 ), so using it here is an estimate . - JEPQ writes calls through notes on the Nasdaq-100. - QQQI writes options on the Nasdaq-100 index. Put $10,000 in each, in a taxable account. Hypothetical rates: 24% on ordinary income, 15% on long-term gains. The build changed when you pay (now or at sale) and the rate (24% or 15%). The tax is deferred, not gone. And tax is only one part: over the same year, JEPQ returned 6.9% in total and QQQI 5.9% . These are filed facts, not tax advice. ### The common mistake "Last year's split will repeat." QYLD also writes Nasdaq-100 index options. Its fund year to Oct 31, 2024 was 0% return of capital. The next, to Oct 31, 2025 , was 12.4% . Its latest notice, an estimate dated Sep 24, 2026 , says 98.8% . Same fund, same build, three very different splits, as each year's gains and losses differ. Check it every year. ### Check your understanding Pick an answer to see why. Two of three right passes the lesson. 1. In a taxable account, a payout is 100% return of capital. What happens this year? A You owe ordinary income tax on all of it B It's taxed at 60% long-term, 40% short-term C It's tax-free forever D No tax this year; your cost basis drops by the payout Answer: D. No tax this year; your cost basis drops by the payout. return of capital isn't taxed when paid; it lowers your basis. Not C: the lower basis raises your gain at sale, so tax comes later. 2. Fund R pays you $2,000, all return of capital. You sell after two years. At a hypothetical 15% long-term rate, how much tax does that $2,000 add at sale? A $0 B $300 C $480 D $2,000 Answer: B. $300. your basis is $2,000 lower, so your gain is $2,000 larger: $2,000 × 15% = $300. Not C: $480 is 24%, the ordinary income rate. 3. Two funds write calls on one index, one through notes, one with index options. What can you say about their tax splits? A The notes fund is usually mostly ordinary income; check each annual report B They'll be the same C The index options fund is always mostly return of capital D Neither is taxed in a taxable account Answer: A. The notes fund is usually mostly ordinary income; check each annual report. the build tends to set the kind; only the annual report confirms it. Not C: QYLD writes index options and paid 0% return of capital one year. ### Takeaways - A fund's build shapes when you pay tax and at what rate, not just how much it pays. - Return of capital defers tax to the sale; it does not remove it. - Read your fund's tax block on ETFIQ every year; the split can change. ### Do it on ETFIQ Compare how two income funds' payouts are taxed Your fund ### Where to next --- Source: ETFIQ, independent ETF data. Recomputed nightly from public filings and prices. Cite: ETFIQ, Tax-aware fund choice: how a fund's build shapes your tax, data as of Nov 10, 2026. https://etfiq.com/academy/planning-deep-dive/tax-aware-fund-choice/ Licence: https://etfiq.com/license/ Data ETFIQ computes is free to use with attribution: ETFIQ (etfiq.com). Issuer data stays under its owner's terms. HTML: https://etfiq.com/academy/planning-deep-dive/tax-aware-fund-choice/