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REITS & Tax Reform

An investment vehicle that may be worth a second look in the wake of tax reform is Real Estate Investment Trusts or REITs. REITs are corporations that primarily invest in real estate and produce income from rental properties or from buying and selling properties.  They are usually sought out for their ability to produce an income stream since 90% of their income is paid out in the form of dividends.

The 20% deduction for pass-through income that was part of the recent tax law change will apply to holders of REITs. This means that investors in REITs will only pay tax on 80% of the dividends earned.  This automatically increases the return on investment for REITs making them an attractive investment.

The 20% deduction took effect January 1, 2018 and can be claimed on your personal tax return starting with the 2018 tax year. Taxpayers in the top income tax bracket of 37% will have an effective rate of 29.6% on their REIT dividends. Please see an investment advisor to find out what REITs may be right for you.

 

 

David K. Raye, CPA, P.C.                     704-887-5298             www.davidrayecpa.com

 

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

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