How a 69-Year-Old’s $500,000 in QQQI Pays Him Every Month While His Cost Basis Falls Toward Zero

QQQI pays roughly $8 per share annually, but nearly all of its distributions are classified as return of capital, steadily eroding investors' cost basis.

Once a shareholder's adjusted cost basis reaches zero, additional QQQI distributions flip from tax-deferred to immediately taxable capital gains.

QQQI's active options overlay costs more than plain QQQ or QQQM, and selling calls can surrender upside during strong market rallies.

You are 69 years old and hold $500,000 of the NEOS Nasdaq-100 High Income ETF ( NASDAQ:QQQI ). Every month, a distribution lands in your brokerage account. Over the trailing twelve months, QQQI has paid $7.648285 per share, including $0.6518 in August 2026. At a recent price of $54.65, the headline yield looks generous. The problem is what most of that check actually is under the tax code.

What many investors fail to realize is that a large portion of QQQI's distribution is actually return of capital (ROC). ROC is a separate tax classification. When a fund pays out cash beyond its net investment income and realized gains, the IRS treats the excess as a return of your own invested principal, arriving in the wrapper of a monthly distribution. That portion is deferred rather than taxed as ordinary income today. In exchange, the IRS requires you to reduce your cost basis by the same amount. You get a tax deferral now, while you build a larger taxable gain for later.

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According to NEOS Investments' IRS Form 8937 filings, the vast majority of QQQI's distributions have been classified as return of capital (ROC). Roughly 94.45% of each distribution from June through December 2024 was classified as ROC, rising to about 98.86% from January through May 2025. That share climbed even further for the remainder of 2025, with approximately 99.60% of each distribution from June through December classified as ROC. NEOS notes that the ROC portion generally reduces a shareholder's cost basis rather than being immediately taxable as income. These classifications apply only to the distributions covered by the recent filing; QQQI's tax treatment can change from year to year.