What tax form do REITs file?
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.
Decoding your 1099-DIV
If you own shares in a REIT, you should receive a copy of IRS Form 1099-DIV each year.
Investors who are invested in an LLC taxed as a partnership will receive a Schedule K-1, while REITs (real estate investment trusts) will issue a 1099 to show your taxable interest and/or dividends.
Form 1120-L, Form 1120-PC, Form 1120-C, Form 1120-FSC, Form 1120-IC-DISC, Form 1120-POL, Form 1120-REIT, Form 1120-RIC, Form 1120-SF, or Form 1120-H is present in the return. These forms may not be filed electronically. Forms 1120-L and 1120-PC may be filed electronically as part of a mixed group return.
Qualified REIT dividends from a fund are reported in Box 5, Section 199A dividends, of your Form 1099‑DIV.
A REIT must be a U.S. entity taxable as a corporation (I.R.C. section 856(a)) so the REIT is an "exempt recipient" not reported on Forms 1099.
Overview. A REIT is taxable as a regular corporation, but is entitled to the dividends paid deduction. Therefore, a REIT does not pay federal income tax on net taxable income distributed as deductible dividends to shareholders. Net income from foreclosure property is taxed at 35 percent.
Publicly traded REITs (also called exchange-traded REITs) have their securities registered with the SEC, file regular reports with the SEC and their securities are listed for trading on an exchange such as the NYSE or NASDAQ.
REITs and REIT Funds
Real estate investment trusts are a poor fit for taxable accounts for the reason that I just mentioned. Their income tends to be high and often composes a big share of the returns that investors earn from them, as REITs must pay out a minimum of 90% of their taxable income in dividends each year.
Avoiding Double Taxation
Unlike many companies however, REIT incomes are not taxed at the corporate level. 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.
What is a 1120 REIT tax form?
Corporation, trusts, and associations electing to be treated as Real Estate Investment Trusts file this form to report their. income, gains, losses, deductions, credits, certain penalties and. income tax liability.
To qualify as a REIT, an organization must be a corporation, trust or association. A REIT cannot be a financial institution or an insurance company and it must be managed by one or more trustees or directors.
Generally, a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year. A new corporation filing a short-period return must generally file by the 15th day of the 4th month after the short period ends.
The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. Taxpayers may also generally deduct 20% of the combined qualified business income amount which includes Qualified REIT Dividends through Dec.
While a REIT is still open to public investors, investors may be able to sell their shares back to the REIT. However, this sale usually comes at a discount; leaving only about 70% to 95% of the original value. Once a REIT is closed to the public, REIT companies may not offer early redemptions.
In general, FIRPTA withholding rules apply to require the REIT to withhold 35% of the amount distributed to foreign shareholders that is designated as a capital gain dividend by the REIT. Corporate investors will also be subject to BPT on such distributions.
Like other publicly registered companies, REITs must disclose financial information to investors and report on material business developments and risks on a timely basis.
Do I Have to Issue a 1099-Misc for a Trustee or Executor Fee Paid by a Trust or Estate? Reporting trustee fees by a trust on a Form 1099-Misc is not required. The 1099-Misc is for payment of services performed in a trade or business by people not treated as employees.
How Are REIT Dividends Treated for Tax Purposes? Allocations of dividends from Non-Traded REITs are ordinary income, capital gains, or return of capital. Part of the dividend that exceeds the REIT's taxable income and is not taxed is the return of capital distribution.
REIT Tax Overview
Dividends are tax deductible. At least 90% of net ordinary taxable income must be distributed and 100% is required to avoid REIT-level tax.
Why not to invest in REITs?
The value of a REIT is based on the real estate market, so if interest rates increase and the demand for properties goes down as a result, it could lead to lower property values, negatively impacting the value of your investment.
| REIT | Forward dividend yield |
|---|---|
| Blackstone Mortgage Trust Inc. (BXMT) | 12.1% |
| KKR Real Estate Finance Trust Inc. (KREF) | 13.5% |
| Easterly Government Properties Inc. (DEA) | 8.3% |
| Realty Income Corp. (O) | 5.5% |
No more than 5% of a REIT's income can be from non-qualifying sources, such as service fees or a non-real estate business. Quarterly, at least 75% of a REIT's assets must consist of real estate assets such as real property or loans secured by real property.
Investors can buy and sell shares of public REITs at any time during trading hours. With private REITs, on the other hand, investors may have to wait for a redemption event, which can occur quarterly or annually, before they can cash out their investment. Additionally, private REITs may charge redemption fees.
SEC Form S-11 is a filing with the Securities and Exchange Commission (SEC) that is used to register securities for real estate investment trusts (REITs). 1 The business of REITs is to acquire, hold, and often manage real estate for the purpose of investment income and capital appreciation.
