65-Year-Old Couples Can Shield $146,000 From Federal Tax by Avoiding SPYI in 2026
Updated
Updated · 24/7 Wall St. · Aug 25
65-Year-Old Couples Can Shield $146,000 From Federal Tax by Avoiding SPYI in 2026
3 articles · Updated · 24/7 Wall St. · Aug 25
Summary
$146,000 of qualified dividends and long-term gains can fall into a 0% federal tax bracket for married couples both 65 or older in 2026, using the standard deduction, age-based add-ons and the senior deduction.
SPYI undercuts that strategy because its covered-call payouts are largely driven by options premium, which can be taxed as ordinary income, Section 1256 gains or return of capital rather than qualified dividends.
On a $53.39 share price, SPYI pays about $6.51 annualized and charges 0.68%, but its one-year total return was 17.18% versus 30.58% for SCHD, reflecting the upside cap from selling calls.
SCHD and DGRO fit the 0% bracket better because their dividends are generally qualified and their lower fees—0.08% for DGRO versus 0.68% for SPYI—leave more room for tax-efficient appreciation.
The swap only helps in taxable accounts: selling SPYI can itself realize gains against the $146,000 ceiling, while IRA holders can ignore distribution character and keep the higher-yield fund if needed.