Taxes - can you offset REIT dividends using passive losses?

[Jim S.]

If you own rental properties that produce passive losses due to depreciation, can you apply this loss to the pass-through tax from REIT dividends?

I have a growing pile of passive losses that I can't do anything useful with and during COVID I've been having fun investing in a number of REITs on the side (SPG, MAC, STOR, PK, CIO) in addition to expanding my rental portfolio. I am hoping I can offset the high tax burden on the dividends using the passive losses my rentals kick off. If it's not possible, I would likely sell my REITs after I hit one year of ownership and book the gains as capital gains before the dividends start killing my taxes.

[Christopher Smith]

No, but many REIT dividend distributions are eligible for 199A treatment (20% deduction), or else you can put them in an IRA and DRIP them which is a great way to accumulate very large positions on a tax efficient basis.

I have both STOR and MPW in my IRA and some MPW outside it so I get both benefits. Picked up STOR and added to MPW in late March during the mini crash, what an unbelievable deal they were then. My avg in STOR in my IRA is 18 cost now 34 fmv after only 9 months and pays a 4.5% dividend on top of it. A whole lot better, simpler and less risky than most syndications to me.

plus Buffett owns it so you know the management team is top shelf.