Are REIT dividends deductible?

The 199A deduction under the Tax Cut and Jobs Act (TCJA) applies to certain income from pass-through entities (including REIT dividends) and allows individuals to take the 20% deduction against REIT dividend distributions that yields an effective tax rate of 29.6% or 37% (80% for upper bracket filers).

How are you taxed on REIT dividends?

The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. Taxpayers may also generally deduct 20% of the combined qualified business income amount which includes Qualified REIT Dividends through Dec.

Can REITs use NOLs?

A REIT can carry forward post-2017 net operating losses (NOLs) indefinitely, to reduce up to 100% of the REIT’s net taxable income in 2018 through 2020 and up to 80% of the REIT’s net taxable income in 2021 and later.

Where do REIT dividends go on tax return?

If you own shares in a REIT, you should receive a copy of IRS Form 1099-DIV each year. This tells you how much you received in dividends and what kind of dividends they were: Ordinary income dividends are reported in Box 1. Capital gains distributions are generally reported in Box 2a.

Are REIT dividends taxed differently?

Dividends from real estate investment trusts, or REITs, are considered taxable income in the eyes of the IRS, but there’s much more to the story than that. There’s no single tax rate that is applied to REIT dividends, and in fact, the same REIT dividend could be made up of several different kinds of income.

How are REITs taxed differently?

Are REITs subject to 163j?

The Final Regulations adopt a safe harbor allowing REITs to elect out of Section 163(j) as an electing real property trade or business if the value of the REIT’s real estate financing assets, such as mortgages, represents less than 10% of the value of the REIT’s assets and clarify that this safe harbor applies …

Is interest expense deductible to a REIT?

Unless a REIT needs to use MACRS to lower taxable income to meet its distribution requirement, the change from MACRS to ADS most likely will not have a significant impact. Mortgage REITs most likely will not be impacted by the limitation since interest expense can be deducted to the extent of interest income.

Do REITs have tax advantages?

REITs provide unique tax advantages that can translate into a steady stream of income for investors and higher yields than what they might earn in fixed-income markets.

How do REITs avoid taxes?

Avoiding REIT dividend taxation If you own REITs in an IRA, you won’t have to worry about dividend taxes each year, nor will you have to pay taxes in the year in which you sell a REIT at a profit. In a traditional IRA, you won’t owe any taxes until you withdraw money from the account.