REIT Tax-Equivalent Distribution

This calculator will estimate the tax-equivalent distribution (TED) for an investment in a real estate investment trust (REIT). Investments in REITs are not tax free, but rather may be partially tax deferred. TED, as set forth in this calculator, measures what an investor would have to earn on a fully taxable investment in order to match the distribution generated when a portion of a REIT's distribution represents return of capital (ROC). This calculator shows a REIT's hypothetical distribution and how ROC impacts tax equivalent distribution.

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Definitions

REIT distribution before taxes
This is the annual distribution of a real estate investment trust (REIT)

Portion of distributions that represent return of capital
This is the percent of the distributions from a REIT that represent return of capital (ROC). ROC is reported in Box 3 of a REIT's 1099-DIV. ROC means that part of the distribution is not taxed in the current year, but instead reduces the cost basis of shares. Rather than paying taxes at an investor's ordinary income tax rate now, investors pay them at the capital gains rate, which is currently lower, when they sell their shares. The amount of ROC, if any, that a REIT has in a year varies.

Estimated taxable income
This is your total income, after exemptions, adjustments, and deductions. We use this, along with your filing status, to determine your marginal income tax rate. You can use last year's tax return as a guide to what your taxable income will be for the current year. Your taxable income can be found on your income tax form 1040 or 1040A. Make sure to increase or decrease the amount to compensate for any changes to your current year's taxable income.

Federal tax filing status
This is used, along with your taxable income, to determine your Federal marginal income tax rate. The table below lists the Federal income tax rates by income and filing status. We use this table to determine your marginal Federal income tax rate.

Filing Status and Income Tax Rates 2010
Tax rateMarried filing jointly
or Qualified Widow(er)
SingleHead of householdMarried filing separately
10% $0 - 16,750 $0 - 8,375 $0 - $11,950 $0 - 8,375
15% $16,751- 68,000 $8,376- 34,000 $11,951- 45,550 $8,376- 34,000
25% $68,001- 137,300 $34,001- 82,400 $45,551- 117,650 $34,001- 68,650
28% $137,301- 209,250 $82,401- 171,850 $117,651- 190,550 $68,651- 104,625
33% $209,251- 373,650 $171,851- 373,650 $190,551- 373,650 $104,626- 186,825
35% over $373,650 over $373,650 over $373,650 over $186,825
Source: http://www.irs.gov/pub/irs-drop/rp-09-50.pdf