Are dividends paid by an ETF that invests in REITs taxed at the "qualified" dividend rate (typically, 15% vs. the ordinary income tax rate)?

(If I recall correctly, REITs are not subject to double taxation, so I don't think the favorable dividend tax treatment applies to them, but I may be wrong.)

  • Could the question be edited for clarity? There is (I think) a double negative in the second sentence.
    – Greg
    Jun 30, 2011 at 13:37

3 Answers 3


They aren't qualified, because the REIT is a special kind of company, and not double-taxed like a regular corporation (as you mention). The income from the real estate holdings gets passed straight through, similar to how a mutual fund passes any interest or capital gains it earns straight through to shareholders.

To avoid the double tax the REIT has to agree to distribute 90% of its income to shareholders, rather than keeping it inside the company. That ensures that while the taxation is only "single," it doesn't get deferred indefinitely into the future. For a normal corporation, paying a dividend is optional and can be put off forever if desired.


In most cases REITs don't pay dividends, they pay distributions which are treated differently.

Here's a REIT Tax-Equivalent Distribution Calculator: http://www.dinkytown.net/java/REITTaxEquivYield.html


Probably not to any appreciable extent, if Vanguard's REIT fund is any indication:


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.