Do you know that the taxation of REITS - Real Estate Investment Trusts – has a different form of taxation than normal equities? REITS, which are equities that allow investors to participate in the real estate market, are truly unique investment vehicles because of their tax status. When congress passed legislation on REITS they exempted companies from paying corporate income tax on qualifying income if they distribute it as dividends. Therefore companies that are known as REITS have a huge advantage over normal equities and can pay out huge dividends to their shareholders!
REIT Qualified Dividends and Earning Income from REITS
For a company to qualify as a REIT, they must pay shareholder a dividend that is equal to at least 90 percent of their taxable income. So this company has more cash than they would normally have had if they had been taxed.
For investors receiving a nice reliable dividend every month from a REIT is very attractive. Investing in dividends for passive income is a proven method for creating wealth because even if the market tanks you are still making an income each month.
If you are nearing retirement and need more income, then you should probably take a look at REITS for the nice monthly dividend they offer.
A recent Forbes article also explains why REITS are very attractive, now more than ever, with the expiring Bush Tax Cuts: “…when these Tax Cuts expire, REITs will not be affected and that will make the well-positioned fortress-like dividends even more attractive, compared to the C-Corporations.”
You can sleep very well at night knowing that you have a steady stream of income from your REIT
Top REITS for 2013 and Beyond
There are a lot of interesting ways to invest in REITS. Here are a few options:
PS Business Parks – Listed on the NYSE, this REIT engages in the acquisition, development, ownership, and operation of commercial properties primarily multi-tenant flex, office, and industrial space. They pay a 2.6 percent dividend annually.
One Liberty Properties (OLP) – A REIT that “engages in the acquisition, ownership, and management of commercial real estate properties in the United States.” They pay a higher dividend at 6.6 percent annually and they are a smaller company than PS.
Annaly Capital Management (NLY) – They pay a 12.10 percent dividend but are perhaps a little riskier than the other two mentioned.
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Thank you for reading this article on the taxation of REITS and REIT dividend taxation.