Best ETFs for Monthly Income in a Taxable Account: SPYI & QQQI

SPYI and QQQI in a Taxable Brokerage Account

Most of your retirement money probably sits in a 401(k) or IRA, and you can’t touch it without a penalty until 59½. So what do you do if you want a paycheck from your investments right now? That’s where a taxable account comes in handy. There’s no age restriction and no withdrawal penalty, so you can just pull income even in the same month you earn it.

SPYI and QQQI are built for exactly that situation. Both are ETFs that throw off large distributions every month, and both can be traded in any standard brokerage account. Income focused investors can use these ETFs to generate extra income on top of a salary, while retirees can fold them into a portfolio that covers living expenses without having to sell any shares. As a yield strategy, both fit in nicely into a wider mix of investments without you having to time the market or rethink your investing plan.

Here’s the appeal in plain terms. You hold the ETFs, the distributions go into your account, and you can decide whether to spend the cash or reinvest it. For someone who wants extra yield from the market today instead of decades from now, that flexibility is the whole point. But, there are some real trade-offs, and we’ll get to them.

How They Pay High Monthly Income

How do these ETFs deliver double-digit yields when the S&P 500 itself yields barely over 1%? The short answer is covered calls. Each fund keeps full exposure to the index it tracks, then sells covered calls against those holdings and collects option premiums in return. Picture renting out the upside on individual stocks you already own. Tenants cover the rent; option buyers cover the premium.

NEOS runs a data driven options strategy, it is done by selling call options that respond to market conditions and volatility instead of writing the same call options every month. Those premiums then become the bulk of what you receive. That’s how these funds generate high monthly income that typical monthly dividend ETFs can’t match on yield alone. They deliver far more than ordinary stock dividends.

So what do you give up? Selling covered calls caps your upside, which is the real risk for an investor who is growth-minded. When the index runs past the strike price, the fund keeps the premium but forfeits the gain above it. That’s basically the trade for the yield. JEPI and JEPQ made this options strategy popular, and SPYI and QQQI pushed covered calls toward even higher distributions, but more importantly, a more convenient tax structure.

One tax detail is built in from the start. Because both ETFs write broad-based index options, those contracts qualify as Section 1256 contracts, which the IRS taxes as 60% long-term and 40% short-term regardless of how long the fund holds them, but that’s not even the key to their efficiency.¹

Inside the NEOS S&P 500 High Income ETF (SPYI)

SPYI, known as the NEOS S&P 500 High Income ETF, is the older of the two funds. It launched in August 2022 and holds around $10.1 billion today. If you are looking for S&P 500 stocks with a nice monthly check, this is the fund for that.

The NEOS S&P 500 High Income ETF (SPYI) tracks the S&P 500 while writing index call options on top, so the fund holds the same 500 large-cap stocks as a conventional index fund. Its underlying exposure shows up in the top holdings, a big-tech roster: NVDA at 7.64%, AAPL at 6.77%, MSFT at 4.29%, AMZN at 3.64%, and GOOGL at 3.22% as of late June 2026.

Now let’s look at income. SPYI comes with a 12.08% distribution rate, with a 12-month trailing distribution rate of 11.78%, paid monthly at a 0.68% expense ratio.² At a share price near $52, that’s roughly $0.53 a share every month. Shares trade right at NAV, with the market price and net asset value at $52.17 and $52.16 in late June, which keeps liquidity tight and day-to-day performance nice and smooth.

Performance has held up well. Since it was launched back in August 2022, the NEOS S&P 500 High Income ETF has returned about 15.33% annualized, with a one-year total return of 23.88% and a three-year mark of 17.12%. Income investors tend to hold ETFs like this in a portfolio for the cash flow, knowing past performance can’t guarantee future results and that the call-writing trades away some of that capital appreciation.

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Inside the NEOS Nasdaq 100 High Income ETF (QQQI)

QQQI is the younger sibling and, somehow, it has already managed to become the bigger fund. The NEOS Nasdaq 100 High Income ETF launched in January 2024 and has pulled in roughly $12.6 billion in net assets, outgrowing SPYI to rank among the largest option-income funds around. Same playbook, heavier on tech. If SPYI is the steady one, then QQQI is the high-octane version.

QQQI also runs the covered call strategy but this time on the Nasdaq 100 index instead of the S&P 500 index, so its underlying exposure leans harder toward technology and communication services. Top holdings as of late June 2026: NVDA at 7.86%, AAPL at 6.94%, MU at 5.27%, MSFT at 4.43%, and AMZN at 4.11%. That’s a heavier semiconductor weighting than Invesco QQQ holders might expect, and it’s the reason why QQQI carries higher volatility than its S&P 500 cousin.

The income runs hotter too. QQQI posts a 14.11% distribution rate, with a 12-month trailing distribution rate of 13.56%, paid monthly at the same 0.68% expense ratio.³ The share price right now is at $55, with the market price and NAV both at $54.94 in late June, giving you deep liquidity at a clean entry point.

Performance since the January 2024 inception date has been strong: about 22.16% annualized, with a one-year return of 30.99%. The NEOS Nasdaq 100 High Income ETF is too young for a three-year track record yet. QQQI gives up some equity appreciation and growth when tech rallies hard, the same risk all these funds carry, and past performance is no guarantee of what comes next.

The Return of Capital Tax Edge

Here’s the part that makes these ETFs a good fit in a taxable account. A large share of what SPYI and QQQI distribute is classified as return of capital, or ROC, instead of ordinary income. The IRS treats an ROC distribution as not immediately taxable; it instead lowers your cost basis until that basis hits zero, after that, payouts are taxed as gains, depending on how long you’ve held the fund.⁴

Plenty of investors see ROC and assume the fund is quietly handing back their own money or bleeding through NAV erosion. That worry is usually misplaced with these ETFs. For an option-income fund, ROC is largely a tax classification tied to how the option premiums and Section 1256 gains get treated for tax purposes, and it can defer your tax bill, delivering payouts in a more tax efficient manner than a fully taxable payer. These can be genuinely strong investment options for a taxable account.

Distribution Rate vs Dividend Yield

These two terms tend to get mixed up, and the difference is worth knowing. A dividend yield reflects only the dividends a fund’s underlying stocks actually generate. A distribution rate annualizes the most recent payout, which for these two ETFs includes option premium income plus ROC, so it runs far above that underlying figure. That difference is why you end up seeing double-digit distribution rates on ETFs whose stocks yield high dividends nowhere near that level.

When you hold these funds, keep your eye on the total return, since the headline rate only tells half the story. A fund can post a 14% distribution and still lag on total return if its price slips, which is what you’d realize when selling. Generally, part of your distributions counts toward qualified dividends taxed at favorable rates, and the rest follows the ROC and 1256 rules. For more on why the ETF wrapper helps, see our breakdown on tax efficiency.

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Expense Ratio and What You Pay

Both funds charge a 0.68% expense ratio, so on cost alone there’s nothing to choose between them. The same expense ratio applies whether you hold SPYI or QQQI. On a $10,000 position, 0.68% works out to about $68 a year in expenses, skimmed automatically from fund assets, regardless of where the market trades, rather than billed to you. No invoice ever shows up in your inbox.

Is that expensive? For a plain index fund, sure, it towers over a 0.03% S&P 500 tracker. For actively managed funds that run an options overlay and handle the tax characterization for you, its expenses are actually in the normal range for the category. You’re funding the strategy, the active management, and the options performance on top of plain exposure. Decide whether the income and tax treatment justify those expenses for your situation, considering the upside risk you take on.

When SPYI and QQQI Make Sense

So who should actually buy these ETFs? Let’s picture a 40-something who has the 401(k) and IRA on track for retirement and now wants money they can access today. SPYI and QQQI fit that investor’s goals well, because favorable capital gains tax rates on long-term gains plus that ROC treatment can make the income land softly at tax time. Long-term gains are generally taxed at 0%, 15%, or 20% depending on your income bracket.⁵

The key points come down to one real trade off. You’re choosing income now over maximum growth later, regardless of what the market does in between. A younger investor with decades of investing ahead is usually better off with growth investments like plain index funds. Income focused investors who want a monthly paycheck, or retirees pulling a steady draw from a portfolio, get more from these ETFs.

Between the two, SPYI brings less volatility while QQQI brings higher volatility and more tech risk. Many investors split the difference and hold both ETFs. If the tax mechanics feel murky for your situation, a financial advisor can map the strategy to your portfolio and bracket before you open a taxable account.

Your Next Move on Monthly Income

So where does that leave you? If that kind of payout is your goal right now, SPYI and QQQI are two ETFs worth a spot on your shortlist. Both throw off double-digit distributions every month at a 0.68% expense ratio, and each one runs the yield strategy and tax mechanics for you. On performance, SPYI leans steadier while QQQI swings harder with tech.

Your next move is simple. Open or fund the account, decide how much monthly income you actually need, then size your position so the payout covers it without overloading your portfolio on tech. Reinvest whatever you don’t spend.

Want to see how these stack up against other payers? Compare them with our list of dividend ETFs for taxable accounts, then grab the free InvestLane index fund cheatsheet to see where high-income ETFs fit alongside your core holdings.

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