5 High Yield REITs That Pay You Tax Free Inside a Roth
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At the 24% bracket, a five-REIT portfolio producing about $39,000 a year in a taxable account sends roughly $9,360 to the IRS annually. Under 26 U.S.C. § 1(h)(11)(D)(iii), REIT dividends fall under separate limits, so most of the payout is taxed as ordinary income at your marginal rate. A REIT’s short-term capital gain distributions are also reported as ordinary dividends. That makes the choice of account more expensive for REITs than for stocks that pay qualified dividends.
$9,360 a Year: What a Taxable Account Costs This REIT Roster
This model puts $100,000 into each of five REITs, for a $500,000 total, at current yields.
| Account | Gross Income | Tax at 24% | Net Income |
|---|---|---|---|
| Roth IRA | $39,000 | $0 | $39,000 |
| Taxable | $39,000 | $9,360 | $29,640 |
With no growth and no new money, the gap adds up to about $93,590 over 10 years. Two caveats apply. Eligible taxpayers can deduct part of their qualified REIT dividends under 26 U.S.C. § 199A(e)(3), so these figures show the tax cost before that deduction. Also, Roth withdrawals are tax free only when they are qualified distributions.
Publication 590-B says a qualified distribution must come after the 5-year period that starts with the year you first contributed to a Roth. The distribution also must be made at or after age 59½, because of disability, to a beneficiary or estate, or for a first home up to a $10,000 lifetime limit. If a distribution doesn’t qualify, the earnings part may be taxable and may face the 10% additional tax.
Realty Income: 5.48% Paid Monthly
Realty Income (NYSE:O) owns net-lease properties, mostly U.S. retail. Its $3.258 annualized dividend yields 5.48%, or $5,476 a year on $100,000. In a taxable account all of it is taxed at your rate. In a Roth, qualified withdrawals arrive in full. AFFO guidance for 2026 is $4.45 to $4.46 per share, well above the dividend. The risk is that management says U.S. retail grows more slowly than its newer areas.
W. P. Carey: 5.77% From Sale-Leasebacks
W. P. Carey (NYSE:WPC) owns diversified net-lease properties, and most of its 2026 investment has gone into warehouse and industrial buildings. The $3.80 annualized dividend yields 5.77%, or $5,766 on $100,000. The dividend uses 71% of AFFO. The risk is tenant credit: Cornerstone and Hertz are both on the watch list at about 60 basis points each.
EPR Properties: Ultra-High-Yield 6.08% on Experiences
Movie theaters, eat-and-play venues, attractions, fitness clubs and live music venues make up the portfolio of EPR Properties (NYSE:EPR). Its $3.72 annualized monthly dividend yields 6.08%, or $6,082 on $100,000. Its third-quarter AFFO payout ratio was 60%. The risk is that theaters still make up roughly one-third of the portfolio.
Omega Healthcare Investors: 5.58% From Skilled Nursing
Omega Healthcare Investors (NYSE:OHI) owns skilled nursing and senior housing facilities that it leases to operators. The $0.68 quarterly dividend yields 5.58%, or $5,583 on $100,000. Third-quarter AFFO was $0.82 per share, above the dividend. The risk is regulation: management said it is "mindful of congressional elections".
AGNC Investment: 16.09% and the Biggest Roth Payoff
AGNC Investment (NASDAQ:AGNC) is a mortgage REIT (mREIT), which is a different business from an equity REIT. It owns leveraged agency mortgage-backed securities instead of buildings, so it carries interest rate and credit risk that property-owning REITs avoid. Its $0.12 monthly dividend yields 16.09%. On $100,000 that is $16,089 a year, with $3,861 in tax at the 24% bracket. In the third quarter, net spread and dollar roll income was $0.37 per share, against $0.36 in dividends declared. The risk is book value: tangible net book value fell 16.9% to $7.13 per share.
Higher Brackets Lose Thousands More
| Bracket | Taxable Net Income | Annual Roth Advantage |
|---|---|---|
| 22% | $30,420 | $8,580 |
| 24% | $29,640 | $9,360 |
| 32% | $26,520 | $12,480 |
| 37% | $24,570 | $14,430 |
For tax year 2025, the 24% bracket covered taxable income from $103,350 to $197,300 for individuals and $206,700 to $394,600 for married couples filing jointly.
What $9,360 a Year Adds Up to Over 20 Years
Say the annual tax savings are reinvested at a conservative 4%, with no change in share prices. At 24%, the difference reaches about $112,370 after 10 years and $278,700 after 20 years. That is what holding these five REITs in a taxable account costs over time.
Three Moves Before Your Next Tax Filing
- Check your 1099-DIV and work out the tax on the ordinary REIT dividends in each taxable account at your bracket.
- Start with AGNC. It accounts for $3,861 of the $9,360 annual tax bill.
- Model a Roth conversion in stages, starting with the highest yielders. Each conversion starts its own 5-year period for the additional tax.
This approach fits retirees and near-retirees who are 59½ or older, have met the five-year rule and want monthly or quarterly REIT income they can keep in full. The quiet years between your final salary and the first required withdrawal are often the cheapest window to move REITs into a Roth, which we sized up in a free Roth conversion guide.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
