What is a 1099-DIV Form and What is it Used For?

If you receive dividends from financial investments during the calendar year, you should receive an IRS Form 1099-DIV in the mail come tax season. The 1099-DIV is an IRS form that financial institutions use to report income from distributions and dividends to taxpayers.

If you own shares in a real estate investment trust (REIT), you need to obtain your 1099-DIV before filing your taxes. Find out what a Form 1099-DIV is, what it is used for, and why you need it when dealing with real estate investing.

What is a 1099-DIV Form?

The IRS Form 1099-DIV details dividends and distributions you receive during the calendar year. As tax time approaches, banks, investment companies, and other financial institutions must complete the 1099-DIV and mail it out to those who received dividends or distributions stocks, investments, and other financial assets.

If you earned dividends over $10, you should receive your Form 1099-DIV by January 31 of the tax filing year.

What is a 1099-DIV Form Used For?

Form 1099-DIV is used by financial institutions, taxpayers, and the Internal Revenue Service (IRS). Payers of dividends and distributions use the form to calculate and report the total amounts received to those who own stock in a regulated investment company (RIC) or REIT.

Taxpayers use Form 1099-DIV to fill out their personal income tax forms. Dividends and distributions must be reported to the Internal Revenue Service. They require this information because they are considered gains, a form of taxable income.

The IRS uses the 1099-DIV form to keep track of your investment income, so you are taxed at an appropriate rate for your income.

Why You Need a Form 1099-DIV

Simply put, you need a 1099-DIV form to comply with the U.S. tax laws regarding capital gains.

If your real estate investment portfolio includes owned stocks in a REIT, the IRS requires you to report your REIT dividends on the 1099-DIV form. Specific instructions on the IRS website direct those who receive REIT dividends to report the gains in section 897, in boxes 2e and 2f.

Qualified Dividends and Your Form 1099-DIV

Typically, dividends are taxed at your normal income rate, which can be quite high if you make enough money. However, a qualified dividend allows you to report your dividends on the 1099-DIV and be taxed at a lower rate. Qualified dividends generally see a tax rate of between 0% to 20%, depending on your tax bracket.

There are several requirements your dividends must meet for the IRS to consider your asset a qualified dividend. The most relevant of these requirements for REIT investors is meeting the necessary holding period.

You may benefit from working with a financial advisor and a qualified accountant to determine whether your REIT dividends meet the criteria to be considered qualified dividends. Depending on your real estate investment portfolio size and the number of REIT stocks in your possession, you can reduce your tax liability when reporting your income on Form 1099-DIV.

 This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All real estate investments have the potential to lose value during the life of the investment. All financed real estate investments have the potential for foreclosure. Cash flow or income are not guaranteed.

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