Are ETFs taxed?

Yes. In a taxable account, you can owe tax on dividends/distributions and on capital gains when you sell.

ETFs can generate taxable events in two main ways:

Dividends (and interest, for bond ETFs) that the fund passes through to shareholders.

Capital gains when you sell your ETF shares for more than you paid.

Even if ETFs often distribute fewer capital gains than many mutual funds, they’re still taxed in taxable accounts.

Also, dividend taxes depend on whether they’re qualified or ordinary (qualified dividends often get lower rates).

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