Investors get big tax breaks if they invest in ‘opportunity zones’ under new Treasury rules
Our Mobile Home Park Investment are located in Qualified Opportunity Zones in Texas.
The Tax Cuts and Jobs Act of 2017 (TCJA) has provided additional tax benefits from investing in “Qualified Opportunity Funds.” These funds create a new tax incentive program designed to promote new investment capital into certain low-income and distressed communities throughout the country. They are referred to as Qualified Opportunity Zones. The program enables investors with unrealized capital gains to receive significant tax incentives for investing in these funds.
A Qualified Opportunity Fund is a privately managed investment vehicle, generally formed as a partnership, LLC or a corporation, whose sole purpose of formation is to invest at least 90% of its assets directly invested into a qualified Opportunity Zone property.
Qualified Opportunity Zones:
Qualified Opportunity Zones are designated census tracts or neighborhoods. For a census
tract to be treated as a Qualified Opportunity Zone, the governor of the respective state must identify such communities in writing to the U.S. Treasury Department. The Treasury Department must then certify each designated area as a Qualified Opportunity Zone. Each zone will maintain it’s designation for 10 years.
Tax Incentives: Under the TCJA there are three specific tax incentives possible for investing in a Qualified Opportunity Zone fund:
Capital Gain Deferral: If an investor has a short or long-term gain from the sale or exchange of property, and the capital gain is reinvested in a Qualified Opportunity Fund within 180 days of the sale of that property or stocks, the realized gain may be able to be deferred until the earlier of the date of the investment in the Qualified Opportunity Fund is disposed of and or December 31, 2026.
Elimination of 10% or 15% of the Deferred Gain:
- 10% of the gain on investments in Qualified Opportunity Funds may be excluded if the taxpayer holds the interest in the Qualified Opportunity Fund for at least five years.
- This exclusion may be increased by an additional 5% if the investment is maintained for at least seven years, thereby eliminating potentially 15% of the original gain from taxation.
- The exclusion is achieved through a step up in basis in connection with the original gain.
Permanent Exclusion on Taxable Gain: When the investment in the Qualified Opportunity Fund is held for 10 years, the taxpayer will not recognize taxable gain on the appreciation in value of the investment in the Qualified Opportunity Fund.
Check with your CPA: Check with your CPA to find out how investing in these Qualified Opportunity Funds will impact your investments.
Opportunity Zone Investing Articles: Read More Links
Cornell Law article
Our web site article page
Accounting Today Article