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Why planners should reconsider REITs for HNW clients

August 20, 2018 Article 2 minute read
Authors:
Brian Schultz Wealth Management
Real estate investment trusts have historically provided a meaningful level of current income but in a relatively tax-inefficient manner. The Tax Cuts and Jobs Act contains new tax breaks for certain REITs that may make them more attractive to investors. Read more at FinancialPlanning.

Image of a man looking out of large office windows, onto a misty city morning.In recent years, financial planners have often recommended high-net-worth clients own real estate investment trusts in tax-advantaged retirement accounts.

That’s because dividends from these high-yielding investments did not qualify for the lower long-term capital gains tax rate that’s allowed for most other equities. Instead, dividends from REITs have been taxed as ordinary income, which meant paying taxes on them at an investor’s highest marginal rate, which can run close to 40% for high-income clients.

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