What’s a REIT?
A Real Estate Investment Trust (REIT) is a publicly traded company that purchases and manages income generating properties such as offices, apartments or shopping malls. For tax purposes, a REIT is classified as pass-through entities, meaning that they are free from tax at the corporate level.
To be classified as a REIT, a real estate company must pay out at least 90% of its taxable income to its shareholders in the form of dividends. Individuals are then taxed on those dividends as normal income, not at the lower rate for stock dividends. For more specific tax information, check with your accountant.
REITs are attractive to many investors because they are a distinct asset class that offers exposure to real estate without the hassle of directly owning and managing property.