When investing in a spot bitcoin ETF outside of a retirement account should i expect adverse tax consequences on an annual basis even if i do not sell? Follow-up question: of the 11 approved spot bitcoin ETF’s which is the most tax friendly?
ETFs are ordinarily highly tax efficient; they rarely incur annual capital gains distributions, unlike mutual funds. However, the SEC has imposed a restriction on the spot bitcoin ETFs – cash settlement vs in-kind – and this could very well result in annual tax liabilities for all shareholders regardless of personal trading. Some believe the SEC will ease up on this requirement; we’ll see how the year goes. I don’t think any of the ETFs will prove to be more tax-efficient than the others, but time will tell.