A 65-Year-Old Couple Can Make $146,000 This Year and Pay 0% on Their Gains. Here’s the Math

SPYI's options premium lands as ordinary income, blocking it from the 0% bracket where SCHD's qualified dividends flow freely.

Stacking the standard deduction, two age-65 add-ons, the OBBBA senior bonus, and the 0% gains threshold shelters $146,000 from federal tax.

SPYI in an IRA sidesteps the tax-character problem entirely; only taxable-account holders need to rotate into SCHD or DGRO.

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If you and your spouse are 65 and holding the NEOS S&P 500 High Income ETF ( CBOE:SPYI ) for its monthly checks, you should know what the fund's structure does to a strategy built around the 0% long-term capital gains bracket. SPYI's roughly $6.51 annualized distribution on a $53.39 share price throws off a double-digit yield, which is why retirees own it. But if the plan for 2026 is to realize up to $146,000 in income and gains at a 0% federal rate, SPYI's options-income machinery works against that goal in a way most holders never see on their monthly statement.

The math starts with three stacked deductions and the 0% capital gains bracket. For 2026, the married-filing-jointly standard deduction is $32,200. Both spouses at 65 or older add the traditional age-65 amount for each, and the One Big Beautiful Bill layered on a new senior deduction on top of that. Add the 0% long-term capital gains threshold for joint filers, which sits at roughly $97,700 of taxable income for 2026, and a couple can pull qualified dividends plus realized long-term gains into that zero-rate zone.

Stacked together, the standard deduction, both age-65 add-ons, the OBBB senior bonus, and the 0% capital gains ceiling produce roughly $146,000 of qualified dividends and long-term gains that face no federal income tax. The catch is in the word qualified . Only distributions that are qualified dividends or long-term capital gains ride the preferential rate schedule. Ordinary-income distributions do not.

SPYI is a covered-call product. It writes index options against an S&P 500 sleeve and passes the premium income through as monthly cash. Options premium is not a qualified dividend. Depending on the fund's tax accounting each year, distributions can land as a mix of ordinary income, Section 1256 gains, and return of capital. The provided distribution record for SPYI, which shows 48 monthly payments and a trailing 12-month total of $6.33 per share, does not itself classify tax character. A large slice of the check may be ordinary income taxed at marginal rates, falling outside the 0% rate a 65-year-old couple is trying to occupy.