T. Rowe Price Personal Investor - Qualified REIT Dividends (2024)

FAQs

Where can I find qualified REIT dividends? ›

Qualified REIT dividends from a fund are reported in Box 5, Section 199A dividends, of your Form 1099‑DIV.

Generally, dividends from REITs are automatically exempt from being qualified dividends. Whether dividends are qualified depends on the nature of the investment that earned the money being passed along to shareholders.

The deduction allows eligible taxpayers to deduct up to 20 percent of their QBI, plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

REITs provide some of the highest dividends available on the stock market. As of July 2024, the average REIT dividend payout was 4.18%, according to the National Association of Real Estate Investment Trusts (NAREIT), compared to the average S&P 500 stock dividend of 1.27%.

How Do Investors Know If the Dividends They've Received Are Qualified or Not? The online trading platform or broker that an investor employs will break down the qualified and ordinary dividends paid in separate boxes on IRS Form 1099-DIV.

The potential downsides, or CONS, of a REIT investment include the fact that they are taxed as income, the variation in the fee structures of different managers, and market volatility due to interest rate movements or trends in the real estate market.

Derive at least 75% of gross income from rent, interest on mortgages that finance real estate, or real estate sales. Pay a minimum of 90% of their taxable income to their shareholders through dividends. Be a taxable corporation.

Dividends are unqualified if they were: Those dividends that did not meet the requirements of a qualified dividend as previously mentioned. Capital gains distributions. Dividends paid on bank deposits, such as credit unions or savings and loans.

The dividend must be paid by a United States corporation or by a foreign corporation that meets certain established requirements (incorporated in a U.S. possession, located in a country with an income tax treaty with the U.S., and whose stock is readily tradable on an established U.S. stock market).

Section 199A dividends are distributions from the profits of domestic real estate investment trusts (REITs) that qualify for a special 20% tax deduction. Investing in Section 199A dividends can provide a valuable tax deduction for investors, and income limits don't apply to Section 199A income from REITS.

Where do I report REIT income on tax return? ›

Use Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to report the income, gains, losses, deductions, credits, certain penalties; and to figure the income tax liability of a REIT.

You Must Have Qualified Business Income. Again, individuals who earn income through pass-through businesses may qualify to deduct from their income tax an amount equal to up to 20% of their "qualified business income" (QBI) from each pass-through business they own.

Qualified dividends are a particular type of dividend you can report on taxes as a capital gain instead of income. Capital gains typically have lower tax rates than income taxes, allowing for increased savings when you file taxes.

Are REITs Good Investments? Investing in REITs is a great way to diversify your portfolio outside of traditional stocks and bonds and can be attractive for their strong dividends and long-term capital appreciation.

Section 199A Dividends. Enter the qualified REIT dividends paid by a REIT or section 199A dividends paid by a RIC to the recipient. This amount is included in the amount reported in box 1a.

How Are REITs Taxed for Ordinary Investors? Most REIT dividends are taxed as ordinary income at the investor's marginal tax rate rather than the lower qualified dividend rate. When an investor sells REIT shares, any appreciation is also subject to capital gains taxes.

Line 2b—Qualified Dividends

If the estate or trust received qualified dividends that were derived from IRD, you must reduce the amount on line 2b(2) by the portion of the estate tax deduction claimed on Form 1041, page 1, line 19, that is attributable to those qualified dividends.