What are the benefits of operating as a REIT?
A company that qualifies as a REIT generally is permitted to deduct dividends paid to its stockholders from its taxable income, which has the effect of reducing the amount of federal corporate level tax the REIT is required to pay. As a result, and in order to comply with certain distribution requirements applicable to REITs, most REITs distribute at least 100 percent of their taxable income to their stockholders and, therefore, do not pay federal corporate level taxes. Most states follow this federal tax treatment and allow REITs to deduct dividends paid to their stockholders from their taxable income for state tax purposes.
