“Terreno Realty Corporation has outlined the federal income tax characteristics for its 2025 dividend distributions to common stockholders, amounting to roughly $1.91 per share across five payment periods. The breakdown reveals 96.4% as ordinary taxable dividends eligible for Section 199A deductions, 3.6% as total capital gains including a minor unrecaptured Section 1250 gain component, and no return of capital. This classification stems from distributions paid in early 2025 from late 2024 declarations, three full quarterly payouts during 2025, and a partial distribution from late 2025 paid in early 2026.”
Terreno Realty Corporation, a prominent real estate investment trust specializing in industrial properties across key U.S. coastal markets, has released critical details on how its dividend payments for 2025 will be treated for federal income tax purposes. This information is essential for shareholders navigating their tax obligations, particularly in light of the unique tax advantages offered by REITs under U.S. tax law.
The total dividend distribution attributable to 2025 comes to approximately $1.91 per common share. This figure encompasses a partial spillover from a distribution declared in late 2024 but paid in early 2025, three standard quarterly dividends declared and disbursed throughout 2025, and a portion of a fourth quarterly dividend declared in November 2025 but paid in January 2026. Specifically, about $0.17 of the $0.52 per share distribution declared on November 4, 2025, and paid on January 9, 2026, is allocated to the 2025 tax year.
Breaking down the payments by date and amount provides clarity on the schedule investors followed:
A distribution of $0.234 per share with a record date of December 13, 2024, and payment date of January 7, 2025.
A quarterly dividend of $0.49 per share recorded on March 27, 2025, and paid on April 4, 2025.
Another $0.49 per share dividend with a record date of June 27, 2025, paid on July 11, 2025.
A $0.52 per share payout recorded on September 29, 2025, and disbursed on October 10, 2025.
Finally, $0.172 per share from the late-2025 declaration, paid on January 9, 2026, but taxed in 2025.
These amounts sum to $1.906 per share in the detailed breakdown, reflecting precise allocations that may include minor rounding for tax reporting.
Tax Characterization Breakdown
The tax treatment of these dividends is predominantly favorable for income-focused investors, with the vast majority classified as ordinary taxable dividends. This category benefits from potential deductions under Section 199A, which allows qualified business income deductions for pass-through entities like REITs, potentially reducing the effective tax rate for eligible taxpayers.
A smaller slice falls under capital gains, which could be taxed at lower long-term rates depending on an investor’s overall tax bracket and holding period. Notably, there’s a negligible amount designated as unrecaptured Section 1250 gain, which applies to depreciation recapture on real estate and is taxed at a maximum rate of 25% for most filers. Importantly, no portion of the 2025 dividends is treated as a return of capital, meaning shareholders won’t see adjustments to their cost basis in the stock from these distributions.
The following table illustrates the per-share tax components for each distribution period:
| Security | Record Date | Date Paid | Dividend per Share | 2025 Ordinary Taxable Dividend | 2025 Total Capital Gain Dividend | 2025 Return of Capital Dividend | 2025 Unrecaptured Section 1250 Gain* | 2025 Section 199A Dividend** |
|---|---|---|---|---|---|---|---|---|
| Common stock | December 13, 2024 | January 7, 2025 | $0.234000 | $0.225672 | $0.008328 | $0.000000 | $0.000008 | $0.225672 |
| Common stock | March 27, 2025 | April 4, 2025 | $0.490000 | $0.472560 | $0.017440 | $0.000000 | $0.000016 | $0.472560 |
| Common stock | June 27, 2025 | July 11, 2025 | $0.490000 | $0.472560 | $0.017440 | $0.000000 | $0.000016 | $0.472560 |
| Common stock | September 29, 2025 | October 10, 2025 | $0.520000 | $0.501493 | $0.018507 | $0.000000 | $0.000017 | $0.501493 |
| Common stock | December 15, 2025 | January 9, 2026 | $0.172000 | $0.165878 | $0.006122 | $0.000000 | $0.000006 | $0.165878 |
| Total | $1.906000 | $1.838163 | $0.067837 | $0.000000 | $0.000063 | $1.838163 | ||
| Percentage of Total | 96.4% | 3.6% | 0.0% | 0.0% | 96.4% |
The unrecaptured Section 1250 gain is a subset of the total capital gain dividend. ** Section 199A dividends are a subset of ordinary taxable dividends and may qualify for the 20% qualified business income deduction.
This allocation underscores Terreno’s operational efficiency, as the absence of return of capital suggests strong earnings coverage without depleting shareholder equity. For REITs, maintaining at least 90% payout of taxable income is a regulatory requirement to avoid corporate-level taxation, and this breakdown confirms compliance while maximizing pass-through benefits to investors.
Implications for U.S. Investors
For American taxpayers, understanding this tax treatment is crucial for accurate Form 1099-DIV reporting, which Terreno will issue to shareholders. Ordinary dividends will appear in Box 1a, while capital gains go into Box 2a, with unrecaptured Section 1250 gains detailed in Box 2b. Section 199A amounts, vital for pass-through deductions, will be noted in Box 5.
Individual investors in higher tax brackets may find the ordinary portion taxed at rates up to 37%, but the Section 199A deduction could shave off up to 20% of that, bringing the effective rate down to around 29.6% for qualified portions. Capital gains, meanwhile, benefit from preferential rates of 0%, 15%, or 20% based on income levels. The tiny unrecaptured gain won’t materially impact most portfolios but serves as a reminder of depreciation effects in real estate holdings.
Institutional investors, such as pension funds or IRAs, might see different treatments, with tax-exempt entities potentially avoiding taxation altogether on these dividends. However, foreign investors should be aware of withholding taxes, typically at 30% on ordinary dividends unless reduced by treaties, and possible FIRPTA implications on capital gains from U.S. real property interests.
In a broader market context, this announcement aligns with trends in the industrial real estate sector, where demand for warehouse and logistics spaces remains robust amid e-commerce growth and supply chain reshoring. Terreno’s focus on infill locations in high-barrier markets like Los Angeles, San Francisco Bay Area, New York City/Northern New Jersey, Seattle, Miami, and Washington, D.C., positions it to generate stable cash flows, supporting consistent dividend growth.
Key Considerations for Tax Planning
Shareholders should consult their tax advisors to integrate this information into their overall strategies. For instance, if held in taxable accounts, these dividends could push investors into higher brackets or trigger net investment income tax at 3.8%. Conversely, in Roth IRAs, the tax-deferred growth amplifies long-term benefits.
Timing also matters: The partial 2025 attribution of the January 2026 payment means investors who sold shares before the December 2025 record date might still owe taxes on the allocated amount, emphasizing the importance of tracking ex-dividend dates.
Moreover, as a REIT, Terreno’s dividends aren’t qualified for the lower qualified dividend tax rates applicable to many corporate stocks, reinforcing the value of Section 199A for offsetting this.
Company Performance Context
Terreno’s dividend policy reflects its disciplined approach to capital allocation, avoiding speculative development and emphasizing acquisitions at below-replacement-cost values. With a portfolio exceeding 19 million square feet across 309 buildings and additional land parcels, the company caters to over 680 tenants in logistics-heavy industries.
This tax announcement comes amid a year where industrial REITs have navigated interest rate fluctuations and economic uncertainties, yet Terreno’s payout increase from prior quarters signals confidence in occupancy rates and rental escalations. Investors monitoring sector peers will note similar tax disclosures from competitors, often showing varying capital gain portions based on property dispositions.
Overall, this tax treatment reinforces Terreno’s appeal as a reliable income generator in the REIT space, blending growth potential with tax-efficient distributions for a U.S. audience prioritizing portfolio diversification.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or investment advice. Readers should consult qualified professionals for personalized guidance based on their individual circumstances.
