The recent Inflation Reduction Act in extended the 20% QBI deduction for another two years, Khaimov added.
The 199A deduction can be “a great benefit, as a high net-worth individual may have income limitations with a non-REIT structure,” he said. “Another benefit for U.S. investors is the ability to invest in a pool of diversified properties nationally without being exposed to multi-state tax filings.”
Where to have a REIT can be most important.
“A partnership structure may eliminate portfolio deductions for individual investors, increasing their taxable income,” Khaimov said. “The QBI deduction for income flowing from a partnership may be completely phased out due to income limitations.”
“Since the bulk of distributions from REITs will be subject to the higher ordinary income tax rate and don’t meet the definition of a qualified dividend, it may make more sense to hold a REIT in an IRA, Roth IRA or 401(k),” Charron said.