A REIT must distribute at least 90% of its taxable income to shareholders each year to keep its favorable pass-through tax status and avoid entity-level tax on the undistributed portion.
How it works
Multiplying REIT taxable income by 90% gives the required distribution; comparing that against actual distributions paid shows whether the REIT meets the requirement or falls short.
What this does not include
This does not include the “deficiency dividend” procedure a REIT can sometimes use to cure a shortfall discovered after the fact, or the separate asset and income composition tests a REIT must also pass to qualify in the first place.
How to use this calculator
- Enter REIT taxable income and actual distributions paid.
Frequently asked questions
Why is this different from the investor-side reit-dividend-tax calculator?
That calculator covers how a shareholder’s REIT dividend is taxed once received; this one checks the REIT entity’s own compliance with the distribution rule that lets it avoid corporate-level tax in the first place.
What happens if a REIT fails to distribute 90%?
It can lose its REIT status for tax purposes, becoming taxed as an ordinary corporation — a serious consequence most REITs work hard to avoid.
Why not just distribute 100% every year to be safe?
Many REITs do distribute close to or above 100% of taxable income, but taxable income can differ from cash available (due to depreciation and other non-cash items), so some REITs manage the distribution carefully relative to actual cash flow.
