Physical gold ETFs like IAU trigger a 28% collectibles tax rate, creating a $13,000 tax gap on $100,000 gains compared to S&P 500 funds, while higher expense ratios further erode long-term returns.
IAU's grantor trust structure triggers higher 28% collectibles tax and 0.25% expense ratio, making it less tax-efficient than equity ETFs.
VOO offers lower long-term capital gains tax at 15% and lower expense ratio with dividend yield, making it more favorable.
GLDM provides same gold exposure with lower 0.10% expense ratio but identical collectibles tax treatment.
SGOL is a physical gold ETF with 0.17% expense ratio, mentioned as peer with same tax treatment but slightly higher fee than GLDM.
BAR is another physical gold trust with 0.17% fee, neutral in article.
Investors in physical gold ETFs like IAU face a 28% collectibles tax rate on long-term gains, significantly higher than the 15% long-term capital gains rate applied to equity funds like VOO. Beyond the tax disparity, structural expense ratios vary, with GLDM offering a lower 0.10% fee compared to IAU's 0.25%, though all physical gold grantor trusts remain subject to the same unfavorable IRS tax treatment.
The IRS classifies physical gold ETFs as grantor trusts holding collectibles, which subjects them to Section 408(m) rules and a maximum 28% long-term tax rate, unlike standard equity ETFs.