DCA, a great analysis, just one critique - I suggest you don’t call them “dividends” for REITs or MLPs as the actual tax treatment is very different from qualified dividend distributions for anyone paying US taxes. I think it’s clearer and more accurate to call them “distributions” instead. Thanks again!
Yes, it can be VERY complicated - some of my REITs classify part of their distributions as return of capital - and therefore not taxable currently until the tax basis goes to zero or the shares are sold and a gain realized (which then is taxed as a capital gain). For US REITs, there’s the section 199a / QBI (qualified business income) deduction which helps reduce the tax rate as well.
True. However, MLPs are different as most issue K-1s. Their distributions are also considered ROC, or return of capital. While REIT dividends are considered ordinary income, they’re quite different from MLPs. They also don’t issue K-1s either. This is why people classify MLP dividends as distributions. They are considered returning your own capital to you. REIT dividends are different. I’ve never heard REIT dividends classified as distributions. And this is from several conversations and meetings with REIT CEO’s like Realty Income, VICI Properties, and Agree Realty. But I appreciate the thoughtful comment.
DCA, a great analysis, just one critique - I suggest you don’t call them “dividends” for REITs or MLPs as the actual tax treatment is very different from qualified dividend distributions for anyone paying US taxes. I think it’s clearer and more accurate to call them “distributions” instead. Thanks again!
Yes, it can be VERY complicated - some of my REITs classify part of their distributions as return of capital - and therefore not taxable currently until the tax basis goes to zero or the shares are sold and a gain realized (which then is taxed as a capital gain). For US REITs, there’s the section 199a / QBI (qualified business income) deduction which helps reduce the tax rate as well.
I’m assuming you hold non-US REITs?
Yes, both US and non-US REITs.
Ah gotcha.
True. However, MLPs are different as most issue K-1s. Their distributions are also considered ROC, or return of capital. While REIT dividends are considered ordinary income, they’re quite different from MLPs. They also don’t issue K-1s either. This is why people classify MLP dividends as distributions. They are considered returning your own capital to you. REIT dividends are different. I’ve never heard REIT dividends classified as distributions. And this is from several conversations and meetings with REIT CEO’s like Realty Income, VICI Properties, and Agree Realty. But I appreciate the thoughtful comment.