Opportunity Zones - The Basics
What are Opportunity Zones?
Opportunity Zones are intended to create incentives for long-term investments in low-income urban and rural communities nationwide. The program was established by Congress in the Tax Cuts and Jobs Act of 2017.
What You Need to Know
First, in order to take advantage of Opportunity Zone incentives, you must have a capital gain. Unlike 1031 exchanges, however, the gain is not required to be invested in a "like-kind" asset. That means your gain can be from the sale of stocks, your company, real estate or any other asset that creates in a capital gain.
Opportunity Zone Incentives
Incentives for investing in Opportunity Zones are fully realized only after holding the asset for ten years, but there are incremental benefits as follows:
Five Years - The original capital gain is reduced by 10%
Seven Years - The original capital gain is reduced by an additional 5%, for a total 15%
Ten Years - The gain created by the investment is eliminated - that's right, no gain on the value created.
We Can Help
Opportunity Zones offer powerful investing incentives for the right investor. They are not for everyone, however, and should be approached with caution and an abundance of diligence, of both the local market and the tax considerations.
For all your questions, contact us. We can help sort out options and potential benefits, as well as the pitfalls, of Opportunity Zone investing.