--- title: How Are REIT Dividends Taxed? description: Because REIT dividends can have a mixture of taxation, understanding the taxation of REIT dividends can be somewhat complex. image: https://www.realized1031.com/hubfs/are%20REITs%20required%20to%20pay%20dividends%3F-1130124948.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # How Are REIT Dividends Taxed? Posted Jan 31, 2023 ![are REITs required to pay dividends?-1130124948](https://www.realized1031.com/hs-fs/hubfs/are%20REITs%20required%20to%20pay%20dividends%3F-1130124948.jpg?width=750&height=392&name=are%20REITs%20required%20to%20pay%20dividends%3F-1130124948.jpg) REIT dividends can have a mixture of taxation. This all depends on the specific REIT. Because of these differences, understanding the taxation of REIT dividends can be somewhat complex. In this article, we’ll discuss how REIT dividends might be taxed. ### Types of Income Distributions from REITs Most REITs do not pay income taxes if they distribute at least 90% of their income to shareholders. REITs distribute their income to shareholders in a variety of ways. Income from rent is classified as ordinary income. A gain on the sale of property is a capital gain. Sometimes the REIT returns capital to shareholders. This is a non-taxable event since shareholders are getting their principal back. ### What Is A Qualified Dividend? Some REITs pay out qualified dividends, taxed at the long-term [capital gains rate](https://www.realized1031.com/capital-gains-tax-rate). A qualified dividend must meet three primary criteria: - It cannot be a non-qualified dividend - Has to be from the US or a (qualified) foreign corporation - Holding period test In summary, the holding period test is that you must hold common stock for 61 days within a 121-day period. For full details and rules of the holding period test, please check this link [https://www.irs.gov/pub/irs-news/ir-04-022.pdf](https://www.irs.gov/pub/irs-news/ir-04-022.pdf). Qualified dividends have a maximum tax rate of 20% but can go up to 23.8% if an investor is subject to [net investment income tax](https://www.realized1031.com/blog/who-pays-net-income-investment-tax-niit) (NIIT), which usually applies to high earners. Qualified dividends can also come from companies such as MSFT, AAPL, and JNJ. As an example of how a qualified dividend is taxed: An investor earns $1000 in dividends from a REIT. At a 15% qualified dividend tax rate, the investor will pay $150 in taxes. Capital gains distributions do not qualify as a qualified dividend. Dividends paid from a bank, credit union, or savings loan account also do not qualify as qualified dividends. This list is by no means exhaustive. ### REIT Dividends and Taxes Some REIT dividends are a combination of qualified and non-qualified dividends. For many REITs, most of their dividends are considered non-qualified.  REITs are considered mostly pass-through income, taxed at an investor’s ordinary income tax rate. In some cases, all dividends of a REIT may be classified as ordinary income.  Investors can find the breakdown of their dividends on a 1099-DIV. The 1099-DIV summarizes investor activity for a specific brokerage account. Investors will get a 1099-DIV for each taxable brokerage account that they have. Note that retirement accounts will not receive a 1099-DIV as they are not taxable accounts. The 1099-DIV generally arrives around February of the following year (e.g., the year taxes are due). Because of the tax reform bill (2017 Tax Cuts and Jobs Act), REIT income is considered small business income or qualified business income (QBI). QBI is part of the Section 199 deduction. The following is an example of the QBI tax calculation: An investor’s tax rate is 22%. They receive $1000 in dividends that are a Section 199 deduction. Taxes owed will be 20% x $1000 = $800 x 22% = $176. This is a little more than the 15% long-term capital gains rate. REIT dividend taxation can be complex because of the different ways that dividends can be taxed. Therefore, it’s best to work with a tax specialist when calculating taxes due on REIT dividends. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. The actual amount and timing of distributions paid by programs is not guaranteed and may vary. There is no guarantee that investors will receive distributions or a return of their capital. These programs can give no assurance that it will be able to pay or maintain distributions, or that distributions will increase over time. Hypothetical examples shown are for illustrative purposes only. A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: - Typically, no secondary market exists for the security listed above. - Potential difficulty discerning between routine interest payments and principal repayment. - Redemption price of a REIT may be worth more or less than the original price paid. - Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. - There is no guarantee you will receive any income. - Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus. A Guide to UPREIT Transactions [![A Guide to UPREIT Transactions](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/UPREIT-eBook-250b.png?width=250&height=250&name=UPREIT-eBook-250b.png "Learn more about the UPREIT ...") ](https://www.realized1031.com/blog/how-are-reit-dividends-taxed#blogform) Download eBook ---   --- ### A Guide to UPREIT Transactions ![A Guide to UPREIT Transactions](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/UPREIT-eBook-550b.jpg?width=550&height=600&name=UPREIT-eBook-550b.jpg) Learn more about the UPREIT process. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "REIT dividends can have a mixture of taxation. This all depends on the specific REIT. Because of these differences, understanding the taxation of REIT dividends can be somewhat complex. In this article, we’ll discuss how REIT dividends might be taxed. Types of Income Distributions from REITs Most REITs do not pay income taxes if they distribute at least 90% of their income to shareholders. REITs distribute their income to shareholders in a variety of ways. Income from rent is classified as ordinary income. A gain on the sale of property is a capital gain. Sometimes the REIT returns capital to shareholders. This is a non-taxable event since shareholders are getting their principal back. What Is A Qualified Dividend? Some REITs pay out qualified dividends, taxed at the long-term capital gains rate. A qualified dividend must meet three primary criteria: It cannot be a non-qualified dividend Has to be from the US or a (qualified) foreign corporation Holding period test In summary, the holding period test is that you must hold common stock for 61 days within a 121-day period. For full details and rules of the holding period test, please check this link https://www.irs.gov/pub/irs-news/ir-04-022.pdf. Qualified dividends have a maximum tax rate of 20% but can go up to 23.8% if an investor is subject to net investment income tax (NIIT), which usually applies to high earners. Qualified dividends can also come from companies such as MSFT, AAPL, and JNJ. As an example of how a qualified dividend is taxed: An investor earns $1000 in dividends from a REIT. At a 15% qualified dividend tax rate, the investor will pay $150 in taxes. Capital gains distributions do not qualify as a qualified dividend. Dividends paid from a bank, credit union, or savings loan account also do not qualify as qualified dividends. This list is by no means exhaustive. REIT Dividends and Taxes Some REIT dividends are a combination of qualified and non-qualified dividends. For many REITs, most of their dividends are considered non-qualified. REITs are considered mostly pass-through income, taxed at an investor’s ordinary income tax rate. In some cases, all dividends of a REIT may be classified as ordinary income. Investors can find the breakdown of their dividends on a 1099-DIV. The 1099-DIV summarizes investor activity for a specific brokerage account. Investors will get a 1099-DIV for each taxable brokerage account that they have. Note that retirement accounts will not receive a 1099-DIV as they are not taxable accounts. The 1099-DIV generally arrives around February of the following year (e.g., the year taxes are due). Because of the tax reform bill (2017 Tax Cuts and Jobs Act), REIT income is considered small business income or qualified business income (QBI). QBI is part of the Section 199 deduction. The following is an example of the QBI tax calculation: An investor’s tax rate is 22%. They receive $1000 in dividends that are a Section 199 deduction. Taxes owed will be 20% x $1000 = $800 x 22% = $176. This is a little more than the 15% long-term capital gains rate. REIT dividend taxation can be complex because of the different ways that dividends can be taxed. Therefore, it’s best to work with a tax specialist when calculating taxes due on REIT dividends.", "articleSection" : [ "UPREIT" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2023-02-01T01:00:00+0000", "datePublished" : "2023-02-01T01:00:00+0000", "description" : "Because REIT dividends can have a mixture of taxation, understanding the taxation of REIT dividends can be somewhat complex.", "headline" : "How Are REIT Dividends Taxed?", "image" : { "@type" : "ImageObject", "height" : 392, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/are%20REITs%20required%20to%20pay%20dividends%3F-1130124948.jpg", "width" : 750 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/how-are-reit-dividends-taxed", "name" : "How Are REIT Dividends Taxed?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/are%20REITs%20required%20to%20pay%20dividends%3F-1130124948.jpg" } ```