Tax Planning: Measuring Tax Inefficiencies of Index ETFs and Investment Accounts

Daoqi Yang, Kindle Direct Publishing, 2025-01-05, ISBN: 9798304806473. 146 pages.
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Description

Index ETFs (exchange-traded funds) are famous for their low cost. They are also promoted as being tax efficient. Indeed, they are typically more tax-efficient than their mutual fund counterparts. But the questions are: Are they generally tax-efficient? How should one measure the tax inefficiencies of index ETFs for a typical investor? How do index ETFs in a taxable account compare to other investment accounts on an after-tax and after-cost basis?

This book aims to provide a comprehensive and quantitative analysis of some representative index ETFs, based on various income and capital gains tax rates for investors in the United States. It also tries to address some fundamental issues in tax planning using data-driven analysis. There are different kinds of accounts that may be used for tax-advantaged investment, such as pretax IRA (individual retirement account) and 401k, Roth IRA and 401k, HSA (health savings account), cash value life insurance, and taxable brokerage accounts. Which one is better, under what circumstances? How should one quantify the criteria under which one account is better than another on an after-tax and after-cost basis? This book answers these questions quantitatively, with mathematical rigor and data analysis.

The book contains data from expensive commercial software, which is why it is priced a bit higher than similar books. A dinner may cost more than this book, but this book could help many investors save 6 digits or more in taxes over the long term.

Author Bio

Dr. Daoqi Yang is a software and finance professional with 20 years of industrial experience in the metro Detroit area, and 5 years of academic research and teaching experience at Wayne State University and University of Minnesota. He received his Ph.D. in applied mathematics and M.S. in computer science from Purdue University, USA, and B.S. from Shandong University, China.

He is the author of several books, including Retirement Planning: 401k vs Roth 401k, IRA vs Roth IRA (Outskirts Press, 2020), C++ and Object Oriented Numeric Computing for Scientists and Engineers (Springer-Verlag, 2001), and Java Persistence with JPA 2.1 (Outskirts Press, 2013). In addition, he has published more than 20 research papers in international journals in the fields of applied mathematics and scientific computing. He is passionate about investing, tax planning, and retirement planning and helping his friends become better investors.

He advocates for using the after-tax and after-cost return when evaluating an investment or investment account and planning for potential future tax rate hikes.

In his free time, he enjoys running and playing pickleball and badminton.


Errata for the Book

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