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I had an answer ready for you last night, assuming you'd be filing a form 1040NR as a nonresident alien, but I deleted it when I noticed that you are actually residing in Israel.
Your questions should be answered by this reference:
W&D | Publications | Articles | Withholding Tax Issues for Foreign Investors in REIT's
As I interpret the above ruling, if the dividends are being transferred to you directly from the REIT or some investment account, then the company or entity making the funds transfer out of the USA is supposed to be withholding 10% from you, and that would remove your obligation to file with IRS. If you choose to go the 1040NR route (which will require a taxpayer ID number), there is an opportunity to claim deductions and exemptions before arriving at the "taxable income", and you may end up paying no tax, if none was withheld. After you have figured the taxable income on 1040NR, which may be zero after deductions and exepmptions, the tax rate scale rises from 10% to 35%, depending upon taxable income from US sources, as you already mentioned.
You can find the 1040 NR form here:
and the instructions here:
Instructions for Form 1040NR (2004)
If this 1999 ruling still applies,
United States Withholding taxes
then you are correct that 25% will be withheld from REIT income paid to you while you reside in Israel. If you had an investment account in the USA, and a US Tax ID number, and the payments were made here, that withholdng would not occur, but you would have to file a 1040NR each year.
There may be some treaty rules that allow you to obtain a foreigh tax credit for your US deductions when paying income tax in Israel. I am allowed to do that with foreign (non-US) tax withholding when paying US income taxes. That is something you are in a better position to find out than I.
For an up-to-date ruling on whether REIT income is being withheld and how much, I suggest you contact the REIT itself, or review what statements are being made on your investment account, if that is where the REIT is held on your behalf.