Minimizing Your Taxes and Managing Your Complex Affairs

Tax Tips, Finance Tips, Fun Events

Tips for Individuals, Businesses and Charities. Fun Events.

Should Your Real Estate Investment Trust (REIT) Be Invested in a Retirement Account?

Before Tax Reform, many investors preferred to have their REITs invested in retirement accounts.

Why? Unlike corporate stock, REIT dividends are treated as ordinary dividends which are not eligible for the maximum 20% qualified dividend tax rate. Ordinary dividends are taxed at your ordinary tax bracket which can go as high as 37%.

After Tax Reform, some investors are adding REITS to their taxable brokerage accounts due to a 20% exclusion of income that REIT dividends are eligible for. This means only 80% of the dividend is taxed for Federal purposes. California will still tax 100% of the REIT dividend.

The effective tax rate on qualified REIT dividends for those in the highest income tax bracket will fall to 29.6% from 37% .

Note: You should never focus on taxes when choosing an investment. However, for those looking to add real estate to their portfolio this new 20% deduction helps.

PS: If you are an accredited investor and would like a referral to privately held REITs please contact me.

For help evaluating the tax efficiency of your investment allocation to taxable versus tax-deferred retirement accounts, contact me today.

Richard Pon CPA, CFP