Where To Put REIT Income On Tax Return?

Each year, if you own REIT shares, you should receive a copy of IRS Form 1099-DIV. This shows how much money you got in dividends and what kind of dividends you got:

The 1099-DIV instructions explain how to report each type of payment on your tax return.

Do you pay taxes on REIT income?

Dividend payments are assigned to ordinary income, capital gains, and return of capital for tax reasons for REITs, each of which may be taxed at a different rate. Early in the year, all public firms, including REITs, must furnish shareholders with information indicating how the prior year’s dividends should be allocated for tax purposes. The Industry Data section contains a historical record of the allocation of REIT distributions between regular income, return of capital, and capital gains.

The majority of REIT dividends are taxed as ordinary income up to a maximum rate of 37% (returning to 39.6% in 2026), plus a 3.8 percent surtax on investment income. Through December 31, 2025, taxpayers can deduct 20% of their combined qualifying business income, which includes Qualified REIT Dividends. When the 20% deduction is taken into account, the highest effective tax rate on Qualified REIT Dividends is normally 29.6%.

REIT dividends, on the other hand, will be taxed at a lower rate in the following situations:

  • When a REIT makes a capital gains distribution (tax rate of up to 20% plus a 3.8 percent surtax) or a return of capital dividend (tax rate of up to 20% plus a 3.8 percent surtax);
  • When a REIT distributes dividends received from a taxable REIT subsidiary or other corporation (20% maximum tax rate plus 3.8 percent surtax); and when a REIT distributes dividends received from a taxable REIT subsidiary or other corporation (20% maximum tax rate plus 3.8 percent surtax); and when a REIT distributes dividends received from
  • When allowed, a REIT pays corporation taxes and keeps the profits (20 percent maximum tax rate, plus the 3.8 percent surtax).

Furthermore, the maximum capital gains rate of 20% (plus the 3.8 percent surtax) applies to the sale of REIT stock in general.

The withholding tax rate on REIT ordinary dividends paid to non-US investors is depicted in this graph.

Do reits issue 1099?

If you invest directly in a REIT, you will receive a 1099-DIV from the REIT. You’ll find that numerous boxes on your Form 1099-DIV have already been filled in. Some of the reporting boxes and their ramifications were recently detailed in an article released by TurboTax, a market leader in tax software for preparing US tax returns.

  • The percentage of box 1a that is considered qualified dividends is reported in box 1b.
  • If you get a capital gain distribution from your investment, you must record it in box 2a.
  • If any state or federal taxes were withheld from your dividends, report them in boxes 4 and 14 for federal withholding and state withholding, respectively.

Where do you put a REIT?

Holding REIT investments in tax-advantaged retirement accounts like as IRAs is by far the greatest option to avoid paying taxes on them.

You don’t have to worry about paying dividend taxes each year in a retirement account, and you also don’t have to worry about capital gains taxes when you sell equities. REIT dividends are good candidates to hold in retirement accounts because most REIT dividends are considered regular income, and there’s also the “return of capital” part of REIT dividends that can increase your capital gains taxes. If you must pick between REITs and traditional dividend equities for your retirement accounts, REITs are likely to be the better option.

When you invest in REITs through a retirement account, you may reinvest 100 percent of your dividends, which is critical for increasing long-term compounding potential.

If you invest in REITs through a traditional IRA or another tax-deferred retirement account, you won’t have to pay taxes on the money until you remove it. Traditional IRA withdrawals are taxable income since traditional IRA donations are often tax-deductible.

If your REITs are held in a Roth IRA or similar after-tax retirement plan, however, you won’t have to pay any taxes on the earnings, even if you make eligible withdrawals. Because you don’t get a tax break for putting money into a Roth IRA, you’ve already paid tax on the money you put in, and your withdrawals are tax-free — even if your REIT assets are worth a lot more than you paid for them.

What tax form do I use for reits?

To record a REIT’s income, gains, losses, deductions, credits, certain penalties, and calculate its income tax liability, use Form 1120-REIT, United States Income Tax Return for Real Estate Investment Trusts.

Why do REITs not pay taxes?

A REIT is required by law to deliver at least 90% of its taxable revenue in the form of dividends to its owners each year. This allows REITs to transfer their tax burden on to their shareholders rather than paying federal taxes.

How do REITs distribute income?

REITs must pay out at least 90% of their taxable revenue to shareholders in the form of taxable dividends every year. To put it another way, a REIT cannot keep its profits. A REIT, like a mutual fund, is eligible for a dividends-paid deduction, which means that if 100% of revenue is distributed, no tax is paid at the entity level.

How are REIT ETFS taxed?

How are dividends from REIT ETFs taxed? After the 20% qualifying business income deduction is applied to those distributions, most REIT ETF dividends will be taxed at your regular income tax rate. Some REIT ETF earnings may be subject to capital gains tax, which will be reported on Form 1099-DIV.

Are REIT dividends taxable in a Roth IRA?

Dividend compounding and tax-free earnings are two major advantages of keeping REIT investments in a Roth IRA.

Investments can grow tax-deferred in any tax-advantaged retirement plan, which means you won’t have to pay capital gains tax if you sell any investments at a profit, and you won’t have to include dividends in your taxable income. The only time you might have to pay taxes is if you take money out of the account.

This is a significant benefit in the case of REIT distributions. One of the key advantages of being a REIT is that its profits are not taxable at the corporate level. In a Roth IRA, however, you will not be taxed on your dividends at the individual level. Holding REIT dividends in a Roth IRA helps you to sidestep the difficulty of tax categorization that comes with REIT dividends.

You’ll never have to pay taxes on your REIT dividends or profits when you sell them since eligible Roth IRA withdrawals are fully tax-free. This can make a significant difference over time.

Are REIT dividends taxable if reinvested?

The tax rules that govern REITs encourage the distribution of earnings to shareholders in the form of dividends. The same requirements apply to dividends, which means that even if they are reinvested in more REIT shares, investors must pay taxes on them.

Are REITs taxable in an IRA?

“According to financial journalist Reuben Gregg Brewer, “if you possess REITs in an IRA, you won’t have to pay taxes on that income until you pull money out of the IRA.” “You’ll pay taxes in any year you receive distributions if you own the same REITs in a standard brokerage account.

How are REIT distributions taxed in Canada?

The revenue and gains from a REIT’s property rental operation are not taxed in Canada. Instead, when a REIT’s property revenue is dispersed, shareholders are taxed on it, and some investors may be excluded.