Opportunity Zones

What are Qualified Opportunity Zones?

 

Qualified Opportunity Zones (QOZs) are a U.S. federal tax incentive program designed to encourage investment and economic development in economically distressed communities. The program was established as part of the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017. There are approximately 8,700 Identified Opportunity Zones nationwide.

Tax Benefits

 

The Qualified Opportunity Zone provides for deferral of capital gains on most type of investments that generate realized taxable gains until December 31, 2026, or until the investment in the QOZ is sold, whichever comes first. Investors also receive a basis step up on any subsequent sale of the QOZ property, which will minimize or eliminate taxes on the QOZ property upon its sale. The step-up basis step-up is 10% if held five years, 15% if held seven years and 100% if held for at least ten years.

How to Invest in Qualified Opportunity Zones

 

A QOZ is an investment vehicle typically organized as a corporation or a partnership which must hold at least 90 percent of its assets in QOZ businesses and assets. From the date of sale of an appreciated asset that triggers taxable gains, an investor has 180 days to invest up to the amount of those gains in a QOF in order to reap the potential tax advantages of the Opportunity Zone Program.

Investors with taxable gains from the sale or exchange of virtually any type of property, including the following, may potentially defer gains by reinvesting the proceeds in a QOF within 180 days of the sale or exchange.