From what I've read, the dividends of bond ETFs (like HYG or JNK) are taxed at the ordinary income tax rate (up to 39.6%).
Is this tax withheld before the dividend is paid out to the investor? Or is the tax paid by the investor later on?
(I've been looking for this answer online, so citing a source would be great if at all possible.)
Is this tax withheld before the dividend is paid out to the investor?
Only if you've been naughty.
https://www.irs.gov/taxtopics/tc307
Topic Number: 307 - Backup Withholding
When it applies, backup withholding requires a payer to withhold tax from income not otherwise subject to withholding. You may be subject to backup withholding if you fail to provide a correct taxpayer identification number (TIN) when required or if you fail to report interest, dividend, or patronage dividend income.
Thus...
Or is the tax paid by the investor later on?
Typically (almost always), yes.
