Opportunity Zones: Unprecedented New Real Estate Tax Strategy

What Are Opportunity zones?

The 2017 Tax Cuts and Jobs Act created Opportunity Zones across the United States, and also defined the tax incentives that investors will receive for investing in Opportunity Zones (OZs). OZs were created to boost economic activity in selected census tracts across the country. According to Brookings Institute there are 8700+ US Census Tracts designated as Opportunity Zones, out of which 19% are in already gentrifying areas.

An Opportunity Zone Fund is an investment vehicle that invests at least 90% of its holdings in real estate, businesses within a Qualified Opportunity Zone. Investments in Qualified OZs through an Opportunity Fund could give investors substantial capital gains tax advantages. 

Qualified Opportunity Zone Investment

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Invest your capital gains from sale of stocks or bonds, sale of a property, or sale of an interest in a partnership.

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Both long term and short term Capital Gains can be invested into an OZ Fund.
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Investors must invest Capital Gains into OZ Fund within 180 days of realizing Capital Gains.

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Qualified OZ investments offer many tax benefits including capital Gains Tax Deferral, Tax Reduction and, even Tax Elimination with a 10-year horizon.

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The size of the opportunity zones are gigantic. About 12% of U.S. census tracts are in the list, over 8,700 opportunity zones. Many of these already attract businesses and investments.

Qualified Opportunity Zone FUND

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A Qualified OZ Fund is an investment vehicle formed for the purpose of investing in a qualified opportunity zone property.

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At least 90% of the Qualified Opportunity Zone Fund’s holdings must be in a qualified opportunity zone property.
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Capital Gains that are invested in an Opportunity Zone Fund must be in the form of equity, not debt.

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The Fund generally intends to engage in ground up development or substantial improvement of an existing property by investing new money into the property. Improvements must be equal to the Opportunity Zone Fund’s initial investment into the existing property, over a 30-month period.

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