Tax Benefits of Real Estate are Compelling

Real estate income has outpaced bond income. Learn how REIT income stacks up against other asset classes.

March 20, 2020

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Tax Benefits of Real Estate Income are Compelling

REAL ESTATE INCOME HAS OUTPACED BOND INCOME*

Income generated by publicly traded real estate investment trusts (Public REITs) and private real estate has outpaced equities, taxable corporate bonds, and municipal bonds over the last 10 years17. Real estate has the potential to provide a steady source of income based on the rent paid by tenants’ which can be used to pay distributions to investors. For investors seeking income, real estate may be an option to consider, especially after-tax benefits are factored in.

AVERAGE DIVIDEND/DISTRIBUTION INCOME RATES OVER 10 YEARS1

Bar Graph: AVERAGE DIVIDEND/DISTRIBUTION INCOME RATES OVER 10 YEARS for Equities, Taxable Corporate Bonds, Municipal Bonds, Public REITS and Private Real Estate

20% OF REIT INCOME ISN’T TAXED

The Tax Cuts and Jobs Act signed into law in December 2017 created a 20% deduction for REIT dividend income available to non-corporate taxpayers, regardless of itemization or adjusted gross income. The tax treatment of the income produced by different asset classes is shown below.

 

Graphic: Outlining Asset Class Incomes and the Divident/Distribution Income Tax Treatment

 

TAX EQUIVALENT YIELD TABLE4— HOW RETURN OF CAPITAL CAN AFFECT REIT YIELDS
(Hypothetical based on 10-year average dividend/distribution income rates)

 

TAX EQUIVALENT YIELD TABLE (footnote 4) — HOW RETURN OF CAPITAL CAN AFFECT REIT YIELDS

 

 

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