K-1 vs. 1099: What Your Tax Form Says About How Your Investment Works  

Quick Take: Every spring, investors in real estate funds and other passive investments look for their K-1 or a 1099. While most aren’t sure what the difference actually means, the form you receive is not just a tax filing detail; it reflects the underlying structure of your investment and determines what tax advantages flow through to you. Understanding the distinction can meaningfully affect an investor’s after-tax outcome.

Tax season has a way of surfacing questions that never came up at the time of investment. One of the most common: “Why did I get a K-1 instead of a 1099?” The answer lies not in the fund’s performance but in its legal structure, and that structure has real consequences for how much of your return you actually keep.

The K-1 Is Powerful and More Complex 

The Schedule K-1 (Form 1065) is issued by partnerships and LLCs taxed as partnerships. It reports each investor’s proportionate share of the entity’s income, losses, deductions, and credits, all of which pass through directly to the investor’s personal return. For real estate partnerships, that means depreciation deductions and cost segregation benefits can reduce taxable income even in years when the fund is generating positive cash flow. Distributions may also be treated as a return of capital, deferring taxes until an asset is sold, at which point the gain is typically taxed at the long-term capital gains rate rather than as ordinary income.

The tradeoff is complexity. 1099s should arrive by January 31, leaving investors more than two months to prepare for the April 15 filing deadline. K-1s often aren’t finalized until March, or later, which can leave little runway to file accurately by April 15 and is often reason enough to file an extension. Investors may also need to file returns in multiple states, depending on where the fund holds assets.  

The 1099 Is Simpler and Still Tax-Efficient 

The Form 1099 is the more familiar of the two and arrives on a predictable schedule. It reports income in straightforward categories: ordinary dividends, qualified dividends, capital gain distributions, and return of capital. There is no pass-through of entity-level depreciation, and no requirement to file in states where the fund’s assets are located.

When the fund issuing the 1099 is structured as a REIT, it carries its own meaningful tax advantage. Under Section 199A of the Internal Revenue Code by the Tax Cuts and Jobs Act of 2017 and made permanent in 2025, investors may be eligible for a 20% federal deduction on qualifying ordinary REIT dividends.¹ At the highest ordinary income rate of 37%, that deduction reduces the effective rate on qualifying distributions to approximately 29.6%.² REIT structures are also typically designed to block Unrelated Business Taxable Income (UBTI), making the investment accessible to IRA and 401(k) holders without triggering the tax complications that often arise with operating partnerships.

Here’s how these tax structures play out in practice, using two of Origin’s own funds as examples.

IncomePlus Fund in Practice

Origin’s IncomePlus Fund transitioned from K-1 to 1099 tax reporting as of tax year 2025. Investors now get simpler tax documents, avoid multi-state filings, and pay lower accounting fees. It also does away with phantom income, a tax owed on income you never actually received.

With the REIT structure in place, qualifying investors may be eligible for the reduced effective federal tax rate and UBTI blockage.³ Importantly, the fund’s investment strategy has not changed and it continues to invest across preferred equity, ground-up development, and common core-plus equity.

Although past tax treatment is not indicative of future results, the fund has historically shielded much of its income through depreciation. Any sheltered portion of distributions is expected to be classified as return of capital, which is not taxable in the year received and reduces an investor’s cost basis over time. Once that basis reaches zero, distributions beyond that point may be taxable as capital gains. The fund may also generate current taxable income if capital gains from an asset sale exceed available depreciation losses, in which case a portion of the distribution could be reported as a capital gains dividend on the 1099.

Investors may also benefit from an advantage specific to the REIT structure: operating and administrative expenses that were previously non-deductible for many investors are now deductible at the entity level. Under the prior partnership structure, these deductions passed through to investors, but many could not use them depending on their individual tax circumstances. The REIT absorbs those deductions directly, which can reduce the taxable portion of distributions for all investors. One important note: unlike K-1 pass-throughs, REIT dividends are classified as portfolio income under the tax code, meaning they cannot be used to offset passive activity losses from other real estate investments.

Credit Fund in Practice

Our private credit offering⁴, offered through our affiliate, Origin Credit Advisers, has been structured as a REIT since its inception as a registered interval fund. Investors receive a Form 1099, and the same Section 199A deduction on qualifying ordinary REIT dividends applies. The Credit Fund’s REIT structure similarly blocks UBTI. 

In any given year, the 1099 may reflect a blend of ordinary dividend income and return of capital. Because the credit fund’s strategy is focused on real estate lending rather than direct property ownership, it does not generate depreciation pass-throughs. When net investment income in a given year is lower than the distribution amount, the excess is characterized as return of capital rather than dividend income. As with the IncomePlus Fund, REIT dividends from the credit fund are classified as portfolio income and cannot be used to offset passive real estate losses.

The Credit Fund offers current income, straightforward 1099 reporting, and the Section 199A deduction on qualifying REIT dividends. As a registered interval fund, it also has limited liquidity, so investors should review the fund’s offering documents for details on redemption restrictions.

Two Funds, One Tax Form, Different Strategies 

Both the IncomePlus Fund and private credit offering now issue 1099s. In both cases, the REIT election is what makes that possible, and it’s what allows qualifying dividends from either fund to receive the Section 199A deduction.

The more meaningful distinction between the two funds is strategic: the IncomePlus Fund is an equity vehicle targeting income, growth, and tax efficiency across the multifamily capital stack, while the credit fund is a credit vehicle targeting current income through multifamily lending. Both issue 1099s and are accessible to retirement account investors. The right fit depends on what role the investment plays in a broader portfolio.