REITs let investors earn income from real estate while enjoying tax benefits and diversification.
7 Tax Advantages of Investing in Real Estate Investment Trusts (REITs)
REITs avoid corporate income tax by passing their income directly to shareholders. This means no double taxation on profits.
1: Pass-Through Taxation: REITs Avoid Double Taxation
REITs must distribute 90% of taxable income as dividends, offering potentially favorable tax treatment for investors.
2: Tax-Exempt Income from Dividends
Depreciation reduces a REIT's taxable income, allowing for higher dividends paid to investors.
3: Depreciation Deductions: Lowering REIT Taxes
REIT investors may benefit from lower capital gains tax rates when properties are sold, making REITs an attractive investment.
4: Capital Gains Tax Benefits
Holding REITs in tax-advantaged accounts like IRAs or 401(k)s defers taxes on dividends and capital gains, boosting long-term growth.
5: Tax Deferral with IRAs and 401(k)s
REITs can defer taxes on property sales using a 1031 exchange, passing on savings to investors through reinvestment.
6: 1031 Exchange Opportunities for REITs
REITs investing in Opportunity Zones can benefit from tax deferrals and potential tax-free growth for long-term investors.
7: Opportunity Zones: Tax Incentives for REITs
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