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.

REIT dividends are not qualified because the IRS considers them as pass-through income. These are profits that get distributed to investors without the entity paying taxes first. REIT dividends pass to investors as ordinary income. The IRS taxes the dividends according to the individual investor's income tax rate.

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.

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.

A dividend is considered qualified if the shareholder has held a stock for more than 60 days in the 121-day period that began 60 days before the ex-dividend date. 2 The ex-dividend date is one market day before the dividend's record date.

Qualified REIT dividends include any dividends you received from a REIT held for more than 45 days and for which the payment isn't obligated to someone else and that isn't a capital gain dividend or qualified dividend, plus your qualified REIT dividends received from a regulated investment company (RIC).

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.

Both qualified and non-qualified (also known as ordinary) dividends are subject to taxation, but they are taxed at different rates. Taxes on qualified dividends are more favorable and mimic long-term capital gains tax rates, which are currently at 0%, 15%, and a maximum of 20%.

Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.

To be a qualified dividend, the payout must be made by a U.S. company or a foreign company that trades in the U.S. or has a tax treaty with the U.S. That part is simple enough to understand.

Are REIT dividends double taxed? ›

Avoiding Double Taxation

That means REITs avoid the dreaded “double-taxation” of corporate tax and personal income tax. Instead, REITs are sheltered from corporate taxes so their investors are only taxed once.

Generally, a REIT must file its income tax return by the 15th day of the 4th month after the end of its tax year.

In exchange for paying 90 plus percent of its income out to investors as dividends, the REIT itself does not pay federal corporate income taxes. This results in REITs often paying higher dividends than companies in other industries. The dividends paid by the REIT are Section 199A dividends.

Section 199A dividends.

A RIC that receives qualified REIT dividends in a tax year may generally pay section 199A dividends for that year, which certain shareholders of the RIC that meet holding period requirements may treat as qualified REIT dividends for purposes of section 199A.

All dividends paid to shareholders must be included on their gross income, but qualified dividends will get more favorable tax treatment.

Enter any qualified dividends from box 1b on Form 1099-DIV on line 3a of Form 1040, Form 1040-SR or Form 1040-NR.

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.

Box 1a will report the total amount of ordinary dividends you receive. Box 1b reports the portion of box 1a that is considered to be qualified dividends. If your investment makes a capital gain distribution to you, it will be reported in box 2a.