K-1 vs 1099 Crowdfunding Taxes 2026: What Each Platform Sends

Which Tax Form Does Each Platform Send?

This is the first question every new investor asks, and it is surprisingly hard to find a straight answer. Here is what each major platform actually sends you.

The pattern is simple: If the platform structures investments as REITs or debt notes, you get a 1099. If it structures them as LLC/partnership interests (most individual deal syndications), you get a K-1.

Fundrise is worth calling out specifically. If you invested in their legacy eFund before it merged into the Growth eREIT, you may receive both a 1099-DIV and a K-1. Tax year 2025 is expected to be the final year Fundrise issues any K-1s. After that, it is 1099-DIV only.

K-1 vs 1099: What Is the Difference?

Let me make this simple, because every other guide overcomplicates it.

Here is the practical difference:

The trade-off: 1099 platforms are simpler but give you no depreciation shelter. K-1 platforms are annoying at tax time but can actually save you money through depreciation deductions. More on that below.

How to Report Crowdfunding Income on Your Tax Return

Here is a step-by-step breakdown by form type. This is what you or your CPA actually need to do.

If You Received a 1099-DIV (Fundrise, Arrived)

1. Report ordinary dividends on Form 1040, Line 3b
2. Report qualified dividends (if any) on Form 1040, Line 3a — but note that most REIT dividends are ordinary income, not qualified dividends, so this line is often zero
3. Report capital gain distributions on Schedule D if your 1099-DIV shows any in Box 2a
4. In TurboTax: Go to Investment Income, then Dividends, enter the amounts from your 1099-DIV

That is it. Five minutes.

If You Received a 1099-INT (Groundfloor, EquityMultiple Alpine Notes)

1. Report interest income on Form 1040, Line 2b
2. If your total interest income exceeds $1,500, you also need Schedule B
3. In TurboTax: Go to Investment Income, then Interest, enter the amounts

Even simpler. Three minutes.

If You Received a K-1 (CrowdStreet, EquityMultiple equity deals)

1. Receive your Schedule K-1 (Form 1065) from the partnership
2. Report on Schedule E (Form 1040), Part II — Income or Loss from Partnerships and S Corporations
3. Each box on the K-1 maps to a specific line on Schedule E — rental income, depreciation, interest, and other items each have their own line
4. If the K-1 shows a net loss, you may be limited by passive activity loss rules (you can generally only deduct passive losses against passive income)
5. In TurboTax: Go to Rental Properties and Royalties (Schedule E section), then select "K-1 Partnership" and enter each box
6. Important: If you have multiple K-1s, you enter each one separately

This takes 15-30 minutes per K-1 if you know what you are doing. If it is your first time, budget an hour or consider paying a CPA.

If You Sold or Liquidated Shares (1099-B)

1. Report on Schedule D and Form 8949
2. Calculate your gain or loss: proceeds minus your cost basis
3. If held longer than one year, it is a long-term capital gain (taxed at 0%, 15%, or 20% depending on income)
4. If held less than one year, it is short-term and taxed at your ordinary income rate

The K-1 Delay Problem

This is the single most frustrating thing about crowdfunding taxes, and nobody warns you about it before you invest.

The problem: K-1s are supposed to arrive by March 15. They almost never do. Many partnerships file their own tax extensions, which pushes K-1 delivery to September 15 or later. A K-1 cannot be issued until the entity completes its own tax return first. If the partnership is slow, you are stuck.

What this means for you: If you have even one K-1 investment, you probably cannot file your personal taxes by April 15.

What to do:

1. File Form 4868 — this gives you an automatic extension until October 15. It is free, takes five minutes, and the IRS does not penalize you for it.
2. You still owe any estimated taxes by April 15. An extension to file is not an extension to pay. Estimate what you owe based on your prior year's K-1 or your cash distributions, and pay that amount by April 15 to avoid interest and penalties.
3. Alternative approach: File your return with reasonable estimates based on prior-year K-1s and your distribution records. If the actual K-1 differs, amend later with Form 1040-X. This works but amendments are a hassle — I recommend just filing the extension.

The timeline you should expect:

My advice: If you invest on K-1 platforms, just assume you will file an extension every year. Build it into your routine.

State Taxes: The Hidden Complication

This catches people off guard. If you invest through a platform that sends K-1s, you may owe taxes in states you have never lived in.

How it works: When you invest in a partnership that owns property in, say, Texas and Georgia, the partnership earns income in those states. Your K-1 reports your share of that income by state. Each state where the property sits can tax you on that income as a non-resident.

What this means in practice:

• You receive a federal K-1 plus a state K-1 for each state where the partnership has properties
• You may need to file a non-resident state tax return in each of those states
• Your home state also taxes the income but gives you a credit for taxes paid to other states, so you are not double-taxed — but you do have to do the paperwork

CrowdStreet investors feel this the most. If you are in five individual deals across five states, that is five state K-1s and potentially five non-resident state returns. At $50-150 per state return (if using a CPA), the costs add up fast on small investments.

The good news: Nine states have no income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Properties in these states do not trigger additional state filings.

1099 investors (Fundrise, Arrived, Groundfloor): You generally only file in your home state. The REIT or lending entity handles state-level obligations. This is a real advantage of the simpler platforms.

Crowdfunding in an IRA: UBIT and UDFI

Investing through a self-directed IRA sounds like the perfect tax hack — all returns grow tax-free (Roth) or tax-deferred (Traditional), right? Mostly, but there is a catch that almost nobody talks about.

How UDFI works in plain English:

Say your IRA invests in a crowdfunding deal. The partnership buys a $1 million property with a $600,000 mortgage. That means 60% of the purchase was financed with debt. So 60% of the income flowing to your IRA is considered debt-financed and subject to UBIT.

Your IRA can deduct depreciation against the taxable portion (using the same 60% ratio), which helps. But if there is net taxable income above the $1,000 annual exemption, the IRA must file Form 990-T and pay the tax from the IRA's own balance.

Key points:

• Passive income (rent, dividends, interest) is normally exempt from UBIT in an IRA
• But when the investment uses leverage (most real estate does), UDFI overrides that exemption
• The tax is paid from the IRA itself, not from your personal funds
• This applies to both Traditional and Roth IRAs
• REIT-structured platforms (Fundrise, Arrived) generally create less UBIT exposure because REITs handle debt at the entity level and pay out dividends

Should this stop you from using an IRA? Not necessarily, especially with a Roth. Paying some UBIT inside a Roth IRA may still be better than paying full income tax outside it, because all future growth remains tax-free. But you need to know it exists so you are not blindsided.

Depreciation: The Hidden Tax Benefit of K-1s

I said earlier that K-1s are annoying. They are. But they come with a genuine tax advantage that 1099 platforms cannot match.

How depreciation works in crowdfunding:

Real estate depreciates on paper — 27.5 years for residential, 39 years for commercial. The partnership calculates depreciation at the entity level and passes your share through on the K-1. This depreciation reduces your taxable income.

The result: You might receive $1,000 in actual cash distributions but only owe taxes on $400 (or even show a loss) because depreciation sheltered the rest. You received real money but owe less in taxes. This is the core tax advantage of real estate investing, and K-1 platforms are the only crowdfunding platforms that pass it through to you.

1099 platforms (Fundrise, Arrived): Depreciation happens at the REIT level. It benefits the fund's overall returns, but you as the investor do not directly claim it on your return.

The catch — depreciation recapture: When the property is eventually sold, previously deducted depreciation is "recaptured" and added back to your taxable income. This portion is taxed at up to 25% (Section 1250 unrecaptured gain), which is higher than the long-term capital gains rate of 15-20% for most people.

So depreciation is not free money — it is a tax deferral. You pay less now and more later when the property sells. But the time value of money makes this favorable for most investors, especially those in high tax brackets.

5 Common Tax Mistakes Crowdfunding Investors Make

1. Not filing an extension when K-1s are late. If you file by April 15 without your K-1s, you are either guessing or leaving them out entirely. Both can trigger IRS notices. Just file Form 4868 — it is free and painless.

2. Forgetting to file non-resident state returns. If your K-1 shows income sourced to another state and you ignore it, that state can come after you. The amounts are usually small, but state tax agencies do cross-reference K-1 data.

3. Treating all distributions as ordinary income. Some distributions are return of capital, which is not taxable income — it reduces your cost basis instead. And some REIT dividends may qualify for the 20% QBI (Qualified Business Income) deduction under Section 199A, which could reduce your effective tax rate. If you are not checking, you might be overpaying.

4. Not tracking your cost basis. This matters when you eventually sell or liquidate. Platforms do not always make it easy. Keep your own records of every investment, every distribution marked as return of capital, and every reinvested dividend. You will thank yourself at exit.

5. Using a CPA who does not understand real estate. A general CPA may not know how to handle K-1 depreciation, passive activity rules, or multi-state filings. If you have more than $10,000 in K-1 investments across multiple platforms, find a CPA who specializes in real estate or alternative investments. The tax savings from correctly handled depreciation alone can pay for the CPA.

Frequently Asked Questions

Related coverage

For more on this topic from CrowdfundedWealth:

• Real estate crowdfunding IRA guide — Best tax-shelter strategy.
• 1031 crowdfunding 2026 — What qualifies and what doesn't.
• International investor guide — FIRPTA, withholding, and US tax compliance.
• Best for accredited investors — Often K-1 not 1099 — different tax treatment.
• Fundrise VCX vs DXYZ — Two NYSE-listed funds, two different 1099 stories.

The Bottom Line

Real estate crowdfunding taxes are not as scary as they seem — but they are different from what most stock market investors are used to. The platform you choose determines your tax experience more than anything else.

If you want simplicity, stick with 1099 platforms like Fundrise, Arrived, or Groundfloor. If you want the tax benefits of depreciation and are willing to deal with K-1 complexity and filing extensions, platforms like CrowdStreet and EquityMultiple offer real advantages for higher-income investors.

Either way, the single best thing you can do is file for an extension the moment you know you have a K-1 coming. It costs nothing, buys you six months, and eliminates the stress entirely.

Want to know what you'll actually earn before taxes? Read our data-driven breakdown of real estate crowdfunding returns — verified numbers from every major platform, compared against REITs and the S&P 500. For a closer look at tax-simple platforms, see our Arrived Homes review (1099-DIV only, QBI-eligible). If you own investment property and want to defer capital gains, our 1031 exchange and crowdfunding guide explains what actually qualifies (DSTs do; Fundrise does not). For investors using an IRA, read the crowdfunding IRA guide — including which platforms trigger UBIT. If you're sitting on losses from PeerStreet, Yieldstreet, DiversyFund, or stuck MogulREITs, the tax loss harvesting forensic guide walks through which IRC sections apply and the §6511(d)(1) 7-year statute of limitations. And if you're new to the space, start with our complete beginner's guide.