Most REIT dividends aren’t qualified dividends — but the ordinary-income portion gets a partial offset most other ordinary dividends don’t receive.
How it works
A REIT distribution splits into three parts per its 1099-DIV: ordinary income (which usually qualifies for a 20% Section 199A deduction before the ordinary rate applies), capital gain (taxed at the lower long-term rate), and return of capital (not taxed this year at all, reducing cost basis instead).
What this does not include
This doesn’t track cost basis reduction from the return-of-capital portion across years — this site’s separate MLP return of capital calculator covers that basis-tracking mechanic in more detail, which applies similarly to REIT return-of-capital distributions.
How to use this calculator
- Enter the total distribution and its split across ordinary income, capital gain, and return of capital, per the 1099-DIV.
- Enter your ordinary and long-term capital gains rates.
Frequently asked questions
Why do REITs pay mostly ordinary, non-qualified dividends?
Because REITs avoid corporate-level tax by distributing income to shareholders — since that income was never taxed at the corporate level, it doesn’t get the qualified-dividend treatment a normal company’s already-taxed profit does.
Is the Section 199A deduction automatic?
Most REIT ordinary dividends qualify without the taxpayer needing to own a pass-through business themselves, unlike the general Section 199A QBI deduction.
What happens to return of capital long-term?
It keeps reducing cost basis distribution after distribution — once basis reaches zero, further return-of-capital distributions become taxable capital gain instead.
