are reit distributions taxable
The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 39.6 percent, plus a separate 3.8 percent surtax on investment income. However, REIT dividends will qualify for a lower tax rate in the following instances: 1  When the individual taxpayer is subject to a lower scheduled income tax rate; 2  When a REIT makes a capital gains distribution (20 percent maximum tax rate, plus the 3.8 percent surtax) or a return of capital distribution; Created by the U.S. Congress in 1960, REITs were designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks. REITs are strong income vehicles because REITs must pay out at least 90 percent of their taxable income in the form of dividends to shareholders. REITs can be publicly traded on major exchanges, public but non-listed or private. The two main types of REITs are Equity REITs and Mortgage REITs. In November 2014, Equity REITs were recognized as a distinct asset class in the Global Industry Classification Standard by S&P Dow Jones Indices and MSCI. Under U.S. Federal income tax law, a REIT is any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages under Internal Revenue Code section 856. For more information about these these financial calculators please visit: Financial Calculators from KJE Computer Solutions, LLC. This calculator will estimate the tax-equivalent distribution (TED) for an investment in a real estate investment trust (REIT). Investments in REITs are not tax free, but rather may be partially tax-deferred. In the United States, a REIT is a company that owns, and in most cases operates, income-producing real estate. Some REITs finance real estate. To be a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends. A real estate investment trust (REIT) is a company that owns and manages income-producing real estate. REITs were created by an act of Congress in 1960 to enable large and small investors alike to enjoy the rental income from commercial property. Return of capital, or net distributions in excess of the REIT's earnings and profits, are not taxed as ordinary income, but instead applied to reduce the shareholder's cost basis in the stock. When the shares are eventually sold, the difference between the share price and reduced tax basis is taxed as a capital gain. For REITs, dividend distributions for tax purposes are allocated to ordinary income, capital gains and return of capital, each of which may be taxed at a different rate. This is the annual distribution of a real estate investment trust (REIT). Portion of distributions that represent return of capital. This is the percent of the distributions from a REIT that represent return of capital (ROC). ROC is reported in Box 3 of a REIT's 1099-DIV. 1 When a REIT distributes dividends received from a taxable REIT subsidiary or other corporation (20 percent maximum tax rate, plus the 3.8 percent surtax); and. 2  When permitted, a REIT pays corporate taxes and retains earnings (20 percent maximum tax rate, plus the 3.8 percent surtax).
Yes