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I bought SPY on december 2018 and as today is about 24% unrealized gains. I would like to know your opinions about selling SPY to buy VOO just for the net expense ratio SPY is 0.09% and VOO is 0.03%. For the taxing purposes I'm a not US citizen investor and living outside US.
Thanks in advance.
Also, review your tax situation in relation to US dividend tax and US estate tax, to see if you would be better off holding an S&P 500 index ETF that is non-US domiciled, for example VUSD. More in the wiki:nbwealth wrote: ↑Fri Feb 14, 2020 10:17 amI bought SPY on december 2018 and as today is about 24% unrealized gains. I would like to know your opinions about selling SPY to buy VOO just for the net expense ratio SPY is 0.09% and VOO is 0.03%. For the taxing purposes I'm a not US citizen investor and living outside US.
Outline of Non-US domiciles - Bogleheads
Nonresident alien's ETF domicile decision table - Bogleheads
As TedSwippet indicates tax situations can be complex. What seems like a good idea, holding US domiciled securities, can be an extraordinary bad idea for some investors who are not US citizens and US residents. Some of those problems don't arise until it is too late to correct them.
If the market ever drops below December 2018 (and it may very well do so) you can tax loss harvest all of it.
What is your home country? If you are paying 30% in US tax on dividends, it sounds like you live somewhere without a US tax treaty, in which case you can reduce that to an effective 15% by holding VUSD instead. VUSD's TER is 0.07%, so not quite as low as VOO, but you reduce your US tax drag from 30% of about 2% to 15% of the same amount. This is equivalent to cutting your cost of investing by around 0.3%, and so is a much larger saving than moving from SPY to VOO.
And as an added bonus, using VUSD completely eliminates any threat you may currently have from US estate tax, a loss of between 26%-40% of your SPY or VOO balance above $60,000.
Again, see the wiki for more. Is there any reason why you stick to US domiciled ETFs rather than using ones that are very likely more tax efficient for you?
Honduras has no US tax treaties, so unless your local (Honduran) tax rate exceeds 30% and Honduras allows you a full credit for all US tax paid on dividends from SPY or VOO, you will benefit from moving to VUSD or any other non-US domiciled S&P 500 index ETF. Also, no US estate tax issues with non-US domiciled ETFs.
You will however need a broker that offers access to non-US exchanges, for example the London Stock Exchange, or Euronext. Or perhaps Mexico, where you can find VUSD under the ticker VUSDN.MX. If Ameritrade only offer US exchanges you will not find VUSD there, because it does not trade in the US.
Maybe look at Interactive Brokers as an alternative broker. It is a nuisance having to move broker, but saving 0.3% of your assets every year in unnecessary US tax and at the same time completely sidestepping any threat of confiscatory US estate taxes could make it worthwhile.