How REIT dividends are taxed
REIT distributions do not get the favorable qualified dividend rates that most corporate dividends receive. Because a REIT deducts the income it pays out, that income is taxed once at the shareholder level as ordinary income at your regular marginal rate.
The offset is Section 199A: qualified REIT dividends qualify for a flat percentage deduction with no wage or property limitation, so a portion of the distribution escapes tax. This calculator applies that deduction, taxes the remainder at your ordinary rate, then adds the Net Investment Income Tax and any state tax, and shows what the deduction is worth.
Basis and date — the deduction is 26 U.S.C. sec. 199A(b)(1)(B), ordinary rates are in sec. 1, and the Net Investment Income Tax is sec. 1411. Content reflects September 2026. Section 199A has carried an expiration date since it was enacted, so confirm current law and check Form 1099-DIV for the split between ordinary, qualified, capital gain and return of capital amounts.
This tool is a general estimate and does not determine your actual tax. Holding REITs in a tax-deferred account, return of capital adjustments and state treatment all change the outcome, so review your situation with a tax professional.
Frequently asked questions
Usually not. Most REIT distributions are ordinary dividends taxed at your regular income rate rather than the lower long-term capital gains rates, because the REIT itself deducts what it distributes. A small slice can be qualified or a return of capital, and Form 1099-DIV breaks it out.
Qualified REIT dividends are eligible for a deduction of a set percentage of the dividend, which lowers the taxable amount without changing your bracket. No wage or property limits apply to this piece, unlike other qualified business income.
A return of capital is not taxed in the year received; it reduces your cost basis instead, which increases the gain when you sell. Track it from your 1099-DIV rather than assuming the whole distribution is income.