Real Estate Syndication vs REIT Calculator
Syndications offer depreciation shelter + LTCG on sale but are illiquid (5-10 year hold). REITs are liquid but dividends are taxed as ordinary income (Section 199A 20% deduction helps).
| Syndication (direct ownership share) | |
| Cumulative cash distributions | — |
| Depreciation shelter (assume offsets 60% of cash) | — |
| Tax on remaining cash (ordinary income) | — |
| Sale value (initial × appreciation^years) | — |
| LTCG tax on sale + depreciation recapture (25%) | — |
| Net after-tax syndication return | — |
| REIT (publicly traded) | |
| Cumulative dividends | — |
| Tax on dividends (ordinary minus 20% Sec 199A QBI) | — |
| Sale value | — |
| LTCG tax on sale (assume 23.8% LTCG+NIIT) | — |
| Net after-tax REIT return | — |
Real estate syndications (private placements) and REITs (publicly traded real estate funds) are the two most common ways to invest in real estate without directly buying property. Syndications offer depreciation shelter and capital gains treatment but require accreditation and 5-10 year illiquidity. REITs offer daily liquidity but dividends are taxed as ordinary income (with a 20% Section 199A discount). This calculator runs 10-year after-tax comparisons.
Syndication Tax Advantages
The killer feature of real estate syndications is depreciation pass-through. Each year, your share of the property's depreciation (typically 3-5% of property value annually, accelerated with cost segregation) reduces your taxable cash distribution to nearly zero — sometimes creating a paper loss that offsets other passive income. On sale, the deferred depreciation is recaptured at 25%, but the appreciation portion qualifies for long-term capital gains (15-20% federal). The result: a syndication might distribute $6,000/year and you pay tax on only $1,000-2,000 — vs a REIT distributing $4,000/year and paying tax on the full amount at ordinary rates.
REIT Tax Treatment
REIT dividends are NOT qualified dividends (with rare exceptions) and are taxed at your ordinary income bracket. Section 199A (TCJA, made permanent by OBBB) provides a 20% qualified business income deduction, effectively reducing REIT dividend tax rate by 20% from the ordinary rate. So a 32% bracket investor pays an effective 25.6% on REIT dividends. On sale, REIT shares qualify for long-term capital gains at 15-20% federal + 3.8% NIIT for high earners. Hold REITs in tax-advantaged accounts (Roth IRA ideal) to bypass the ordinary income hit.
Liquidity and Access Differences
Syndications: typically 506(b) or 506(c) Reg D offerings, $25K-$100K minimums, accredited investor required for most, 5-10 year illiquid hold, exit driven by general partner. K-1 tax forms (delivered late, often after April 15). REITs: any brokerage account, no minimums, no accreditation, daily liquidity, 1099-DIV tax forms (simple). Most retail investors should default to REITs unless they specifically need the depreciation shelter and can afford the illiquidity.
Last updated May 2026. Sources: SEC REITs.