The Tax Cuts and Jobs Act of 2017 ushered in sweeping changes to the Internal Revenue Code, and the Opportunity Zone program is one of the law’s most exciting components. The following is a brief examination of how to invest in Opportunity Zones.
What Exactly Is an Opportunity Zone?
The IRS describes Opportunity Zones as economically distressed communities in which new investments may be eligible to receive preferential tax benefits. The first Opportunity Zones were created in April 2018, and they now exist in 50 states, D.C., and five U.S. territories.
What are the Benefits of Investing in an Opportunity Zone?
Under the new tax law, real estate developers who invest in projects such as apartment buildings or warehouses in an Opportunity Zone—or individuals who invest in designated Opportunity Zone funds—can receive a variety of tax benefits. These benefits include deferred capital gains taxes, additional tax exemption for Opportunity Zone fund gains if you hold the fund for ten years, and a 15% reduction in taxes owed on certain investments.
How Can You Invest in an Opportunity Zone Fund?
In basic terms, you can invest in an Opportunity Zone fund by selling or exchanging an asset—stocks, bonds, real estate, etc.—and rolling over cash equal to the gain on the sale into an ownership interest in the fund. Provided that the fund owns qualified Opportunity Zone property, the program’s benefits will then apply to your interest in the fund. If done properly, this can be a tremendous advantage for real estate developers and investors alike.
For more information or assistance with your Opportunity Zone investment, contact the Law Offices of Leo White at (610) 579-9141.