The new tax rate would make REITs a more attractive investment option for income-minded investors, adding to demand for REIT-related investments. Investors who earn rental income outside of REITs would fall under the top tax rate of 37% under the new bill but they would see their tax hit lowered to 29.6% through a REITs position.

This new tax legislation does not affect the capital gains on REITs, which remains at 20%.

“There has never been a lower rate of tax for rent and mortgage interest received through REITs,” David Miller, a partner in the tax department of Proskauer Rose LLP, told the WSJ. “This is unprecedented.”

Investors interested in gaining broad exposure to the dividend-paying REITs can look at ETF options like the Vanguard REIT ETF (NYSEArca: VNQ), iShares Dow Jones US Real Estate Index Fund (NYSEArca: IYR) and Schwab US REIT ETF (NYSEArca: SCHH), among others. VNQ has a 4.67% 12-month yield, IYR shows a 3.93% 12-month yield and SCHH comes with a 2.60% 12-month yield.

For more information on real estate investment trusts, visit our REITs category.

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