Real Estate Investment Trust
What a REIT is, the rules it must follow, how its dividends are taxed, and a calculator for your after-tax REIT income.
Real estate investment trust dividend tax calculator
What a real estate investment trust is
A real estate investment trust (REIT) is a company that owns, and usually operates, income-producing real estate such as apartments, warehouses, offices or cell towers, or holds mortgages. Buying REIT shares lets you invest in property without buying buildings. To qualify for REIT status a company must, among other tests, invest at least 75% of its assets in real estate and earn at least 75% of its gross income from real estate (IRC §856), and pay out at least 90% of its taxable income as dividends (IRC §857). In return it generally pays no corporate tax on what it distributes.
How REIT dividends are taxed
Most REIT dividends aren't qualified dividends; they're taxed at ordinary rates. But "qualified REIT dividends" (Form 1099-DIV Box 5, Section 199A dividends) get the 20% qualified business income deduction, which the 2025 budget law made permanent. At the 37% top rate that's an effective 29.6%. Part of a payout may also be capital gain (Box 2a) or return of capital (Box 3), which lowers your basis. Add the 3.8% net investment income tax if it applies.
Holding REITs in an IRA avoids the annual tax. Model income with the dividend calculator.
Common questions
How are REIT dividends taxed?
Mostly as ordinary income, but qualified REIT dividends get a 20% deduction, so a 37% bracket pays 29.6%.
How much must a REIT pay out?
At least 90% of its taxable income.
Where are qualified REIT dividends on Form 1099-DIV?
Box 5, Section 199A dividends.
Sources
- Investor.gov: Real estate investment trust
- IRS: Qualified business income deduction
- IRS: Instructions for Form 1099-DIV
- 26 U.S.C. 857 (Cornell LII)
- Paul Hastings: OBBBA tax updates for REITs
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General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.