So you own a few ETFs and you’re ready to optimize your accounts. Especially you rich chumps and chumpettes with taxable accounts! Well swap ETFs are a crazy scheme with the primary benefit being tax savings. I mean, what’s with these governments! How dare they use our hard earned money to pay for roads, schools, and fundamental basic services! Even the so called “Tax Free Savings Account” is subject to some foreign withholding taxes.
Never fear, your crazy uncle has a scheme for those taxes!
Get to the point! What’s a swap ETF?
Well let me break it down for you wizards. A swap ETF essentially turns dividends or interest income into capital gains. Why would you want that? Because foreign dividends and interest are taxed at your full income tax rate, meanwhile capital gains are only half that. If you make over $138,586 your federal tax rates will be like so: