In late 2017, under the Tax Cuts and Jobs Act, a new economic development and revitalization program was conceived, known as Qualified Opportunity Zones (QOZs.) Opportunity Zones are designed to promote private investment in the development and revitalization of low-income communities in the 50 United States, the federal district, and five US territories.
As opposed to the more traditional economic development programs, Opportunity Zones don’t rely on public finance or tax credits. Taxpayers that invest in QOZs receive an exclusive opportunity to defer and reduce realized capital gains on the principal investment, eliminating their capital gains tax burden.
In the video below, we explain what Qualified Opportunity Zones are, who qualifies, where they are located, and why you should consider a QOZ investment.
What is a Qualified Opportunity Zone?
Qualified Opportunity Zones are census tracts composed of economically distressed communities within the 50 states, Washington DC, and five US territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands.) On June 14, 2018, the Treasury Department certified more than 8,700 census tracts as Opportunity Zones. These tracts will retain this designation until 2027.
Why Should I Invest in a QOZ?
In tandem with Qualified Opportunity Zones are the Qualified Opportunity Funds. A Qualified Opportunity Fund (QOF) is the investment vehicle in which the investor uses to retain and preserve investment dollars generated. Investors who retain their Opportunity Fund investments for a minimum of 10 years become eligible to defer and reduce initial gains liability, and can expect to receive a permanent exclusion from the taxable income of capital gains on profits from the sale.
Who Qualifies for Opportunity Zones?
Any taxpayer that recognizes a capital gain may qualify for Opportunity Zones.
Where are Qualified Opportunity Zones Located?
Several online resources have detailed maps that identify Qualified Opportunity Zones throughout the United States and the five designated US territories. Another incentive is that you don’t have to live in the zone or even the same state for that matter. An investor may live in Pennsylvania and invest in an Opportunity Zone in California.
How Can I Learn More?
To learn more about what qualifies as an Opportunity Zone investment, the tax benefits and the mechanics of Qualified Opportunity Zones, I invite you to join our upcoming webinar Win Win: The Power of Opportunity Zones. Discover the many advantages to this new tax incentive.