Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Tax essentials: How to keep more of what you earn % of ETFs paying out capital gains distributions What to do when every dollar counts 25% investors to consider tax efficiency in building a portfolio. iShares % Avg. 20 <5 15 What does it mean to be “tax-efficient”? Some investors are surprised to find that they have to pay taxes on their mutual fund and 10 5 In a low return environment, every dollar counts. Now more than ever, it’s important for 5 2 7 6 ETF investments even if they didn’t sell their funds during the year. See below for key facts on capital gains and dividends. 1 20 12 20 13 20 14 20 15 20 16 0 Vanguard % Avg. 13 25% 20 15 19 13 13 13 11 10 5 20 12 20 13 20 14 20 15 20 16 0 25% 20 15 Two types of dividends Capital gains from your investment activity • If you sell a security at a gain, you have to pay taxes on the proceeds. Ordinary dividends • Funds can distribute two kinds of dividends: ordinary or qualified. • Long-term capital gains are currently • Ordinary dividends are taxed at ordinary taxed at 23.8%; short-term gains are taxed at ordinary income rates (up to 43.4%).1 23 19 19 19 14 income rates (up to 43.4% depending on your tax bracket). Capital gains distributions from the fund • When funds sell securities at a gain, they have to distribute proceeds to shareholders. Qualified dividend income (“QDI”) • Dividends that meet holding period and other requirements are taxed at a lower rate (23.8% for the highest tax bracket). • You pay taxes on the distribution you • Funds that have a higher percentage of receive, regardless of whether you gained or lost money on your investment. State Street % Avg. 19 Two types of capital gains qualified dividends are therefore more tax efficient. The Bottom Line The Bottom Line Minimize capital gains distributions Maximize the percentage of QDI to gain tax efficiency to gain tax efficiency Meet tax-efficient iShares ETFs2 10 iShares has a track record of providing tax-efficient ETFs. 5 •• Over the past 5 years, less than 5% of iShares ETFs distributed capital gains. Meanwhile, 20 12 20 13 20 14 20 15 20 16 0 Source: Morningstar, as of 12/31/16. Number of funds includes all funds that incepted on or before 10/31 of each year, and excludes any funds that closed on or before 10/31 of each year. Past distributions not indicative of future distributions. iShares.com/tax over 5 out of 10 mutual funds have distributed capital gains during that time •• 220+ iShares ETFs have never paid a capital gain •• In 2016, over 100 iShares ETFs generated 100% qualified dividend income (QDI), which is taxed at a lower rate than ordinary dividends The iShares tax difference Not all investments are created equal when it comes to tax efficiency. Three characteristics set iShares ETFs apart when it comes to helping you keep more of what you earn: Three things set iShares ETFs apart Why it matters What makes iShares ETFs different Dedicated ETF structure When funds buy and sell securities in cash, they exchange cash for securities and vice versa. Cash transactions are considered taxable events and can cause funds to incur gains. iShares ETFs offer dedicated ETF structures, so they can exchange securities for securities and minimize tax consequences. Portfolio management Portfolio managers must build and manage a fund diligently to achieve tax efficiency. iShares portfolio managers constantly assess the risk and tax consequences of each transaction to help reduce risk and maximize tax efficiency. Delivering on our reputation for low cost and tax-efficient investments is integral to every decision we make. Tax expertise Fund managers can use a variety of tools to help manage taxes, so it’s important to select a manager who has tax expertise. iShares ETFs benefit from the full power of BlackRock analytics and iShares’ portfolio management team. What you can do Take a look at your portfolio to find out where you’re sensitive to taxes, and check out iShares.com/tax for more on what makes iShares ETFs different. For financial professionals, request a tax analysis from iShares today. 1 A long term capital gain is a gain from a sale of a security owned longer than 12 months. A short term gain is from the sale of a security owned for 12 months or less. 43.4% includes the impact of the highest marginal tax rate of 39.6% and the impact of a 3.8% Medicare Contribution Tax. 2 Source: BlackRock, as of 12/31/2016. Past distributions not indicative of future distributions. Certain traditional mutual funds can also be tax efficient. Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing. iS-19695-1116 Investing involves risk, including possible loss of principal. Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders. The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”). This material is provided for educational purposes only and does not constitute investment advice. The information contained herein is based on current tax laws, which may change in the future. BlackRock cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. The information provided in this material does not constitute any specific legal, tax or accounting advice. Please consult with qualified professionals for this type of advice. Views expressed are as of the date indicated and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. ©2017 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. All other marks are the property of their respective owners. 008063_ISHR_TaxEssentials_v1 Not FDIC Insured • May Lose Value • No Bank Guarantee