RLJ Lodging Trust: Tax Treatment of 2024 Dividends and Its Impact on Shareholders

RLJ Lodging Trust (NYSE: RLJ) has announced the tax classification of its 2024 dividend distributions for common and Series A Preferred shares, providing valuable information for shareholders to plan their investments and tax strategies. The company's common shareholders will receive total distributions of $0.50 per share, while Series A Preferred shareholders will receive $1.95 per share. The tax implications of these distributions are crucial for investors to understand, as they can significantly impact after-tax income.



For common shareholders, the total distributions of $0.50 per share comprise $0.4812 in ordinary non-qualifying dividends and $0.0188 in capital gains dividends. Ordinary non-qualifying dividends are taxed at the shareholder's ordinary income tax rate, while capital gains dividends are taxed at the shareholder's capital gains tax rate. Assuming a 24% federal income tax rate and a 15% capital gains tax rate, the after-tax income for common shareholders would be approximately $0.3784 per share.

Series A Preferred shareholders will receive total distributions of $1.95 per share, paid in four equal quarterly installments of $0.4875. These distributions include $1.8768 in ordinary non-qualifying dividends and $0.0732 in capital gains dividends. Using the same tax rates as above, the after-tax income for Series A Preferred shareholders would be approximately $1.4376 per share.



The qualification of RLJ Lodging Trust's dividends for Section 199A is significant for its shareholders, as it allows them to potentially benefit from lower tax rates on their qualified dividends. Section 199A of the Internal Revenue Code provides a 20% deduction on qualified business income for eligible taxpayers, which can include dividends from REITs that qualify. This means that a portion of RLJ Lodging Trust's dividends may be eligible for the 20% tax deduction, potentially reducing shareholders' tax liability.

In comparison to other REITs, RLJ Lodging Trust's qualification for Section 199A dividends is a positive attribute that may make it more attractive to investors seeking tax-advantaged income. However, it's important to note that the specific tax implications for individual shareholders will depend on their personal tax situation and the tax laws in their jurisdiction.

In conclusion, the tax classification of RLJ Lodging Trust's 2024 dividends has significant implications for shareholders, as it can impact their after-tax income and potential tax deductions. Shareholders should consult with their tax advisors to understand the specific implications for their personal tax situation and make informed investment decisions.