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When investing with Fundrise, it is important to understand what specific types of Fundrise investments are in your portfolio. This will determine how your Fundrise investments will be taxed.
Fundrise tax implications will come from one or a variety of these taxable events:
Capital gains or losses occur when Fundrise sells a property. These gains or losses will be reported on the partnership tax return and passed through to individual investors via a K-1 tax form.
Capital gains earned on Fundrise are subject to capital gains tax rates depending on the term of the investment.
Long-term capital gains are taxed at 0%, 15%, or 20% depending on your ordinary income tax bracket. This is for investments held for longer than a year.
Short-term capital gains are taxed at the taxpayer’s ordinary income tax rate. This is for investments sold within a year of ownership.
Dividends are earned through rental income collected from Fundrise properties. Fundrise dividends are taxed as ordinary income to the shareholders. Since this is a REIT, you cannot earn qualified dividends.
Interest is earned when Fundrise participates in real estate debt investments. Any interest earned by the fund will be reported to shareholders. Interest earned on Fundrise is taxed as ordinary income to shareholders.
Some interest payments can be received as dividend income from Fundrise REITs.
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Form 1099-DIV/B will be available towards the end of January 2023.
Form K-1 will be available in Mid-March 2023.
All forms will be viewable by logging in to your Fundrise account on your computer. From there, you will navigate to the tax center. Here you will be able to view and download relevant forms.
Form K-1 is a tax document that reports tax implications created by the ownership of a partnership investment. This document outlines whether there was ordinary income generated, capital gains or losses, or dividends paid to shareholders.
If you are a Fundrise eFund investor, then you will receive a form K-1 to report.
Fundrise eREITs will report any dividends earned on Form 1099-DIV.
Fundrise dividends are taxed as ordinary income and do not qualify for the lower qualified dividends tax rate.
This form reports any proceeds from transactions where an investor may have realized a capital gain or capital loss. 1099-B may be reported if you have a real estate transaction and receive cash in exchange.
If you buy and sell Fundrise funds and realize a capital gain or loss, then you will receive a Form 1099-B to report this transaction on your tax return.
You have the option to invest in Fundrise via an Individual Retirement Account (IRA) managed by the Millenium Trust Company. Fundrise IRA accounts have a $125 annual fee, but allow investors to save and invest for retirement using the Fundrise platform.
Dividends or capital gains earned within a Fundrise IRA will not be subject to income taxes. The only time a taxable event occurs within a retirement account is when funds are disbursed out of the account.
Additionally, any annual contributions to a traditional IRA qualify as a tax deduction. Of course, this depends on your total household income level for the year.
If you are ready to start filing your taxes, you can file your federal return for free using E-File!