Your initial SCHD investment amount
How long you plan to hold your investment
Expected annual total return (historical avg: 10.5%)
Current dividend yield (currently: 3.91%)
Investing $10,000 in SCHD over a 10-year period
| Year | Portfolio Value | Annual Dividend | Taxes Paid | After-Tax Value |
|---|---|---|---|---|
| 1 | $11,050.00 | $391.00 | $58.65 | $10,991.35 |
| 5 | $16,471.43 | $644.03 | $96.60 | $16,374.83 |
| 10 | $27,276.04 | $1,066.49 | $159.97 | $24,298.10 |
When investing in dividend ETFs like SCHD, your actual return is affected by taxes on both dividends and capital gains. Understanding these tax implications helps you make more informed investment decisions and choose the most advantageous account types.
SCHD primarily distributes qualified dividends, which receive preferential tax treatment compared to ordinary income. To qualify for the lower qualified dividend tax rates:
For the 2025 tax year, qualified dividend and long-term capital gains tax rates are:
| Filing Status | 0% | 15% | 20% |
|---|---|---|---|
| Single | $0 - $48,350 | $48,351 - $533,400 | Over $533,400 |
| Married Filing Jointly | $0 - $96,700 | $96,701 - $600,050 | Over $600,050 |
Where you hold your SCHD investment can significantly impact your after-tax returns:
During market downturns, selling SCHD at a loss and replacing it with a similar but not "substantially identical" ETF can generate tax losses to offset gains while maintaining market exposure. The IRS wash sale rule prohibits claiming a loss if you repurchase the same security within 30 days.
Place SCHD in the most tax-efficient account based on your situation. For many investors, holding dividend-focused ETFs like SCHD in Roth accounts maximizes after-tax returns, especially if you're in a high tax bracket.
Ensure you hold SCHD for more than 60 days around dividend dates to qualify for lower tax rates on dividends. For capital gains, maintain positions for over one year to benefit from long-term capital gains rates.
If you're near a tax bracket threshold, consider strategies to manage your income level. Some investors time capital gains realization to years when they have lower income to take advantage of the 0% capital gains rate.
Yes, the vast majority of SCHD's dividend distributions are qualified dividends, which are taxed at the lower long-term capital gains rates (0%, 15%, or 20%, depending on your income) rather than as ordinary income. This makes SCHD relatively tax-efficient for taxable accounts compared to ETFs with high non-qualified dividend distributions.
Even if you reinvest all dividends from SCHD, you still owe taxes on those dividends in the year they are distributed (unless held in a tax-advantaged account). Reinvested dividends increase your cost basis in SCHD, which will reduce your capital gains taxes when you eventually sell shares.
For many investors, the best account for SCHD depends on your specific situation. Since SCHD generates qualified dividends taxed at preferential rates, it's relatively tax-efficient for taxable accounts. However, if you're in a high tax bracket, you might prefer holding it in a Roth IRA to eliminate all taxes on dividends and growth. Traditional IRAs/401(k)s may not be ideal for SCHD because withdrawals are taxed as ordinary income, losing the qualified dividend tax advantage.
State taxation of dividends and capital gains varies significantly. Some states (like Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) have no state income tax, while others may tax dividends and capital gains at rates up to 13.3% (California). This state tax burden is in addition to federal taxes and can significantly impact your after-tax returns from SCHD investments.
Calculate potential dividend income and growth from your SCHD investment over time.
Use CalculatorCalculate how much SCHD you need to replace a specific percentage of your income.
Use CalculatorCompare the investment returns and income potential between SCHD and JEPI ETFs.
Use Calculator