Opportunity Zones created under the new tax law offer enormous tax-savings and investment potential. Investors in Opportunity Zone funds can defer and reduce capital gain tax. For businesses located in a designated zone, these tax incentives offer excellent fundraising opportunities.
Investing in Opportunity Zones
Investments in businesses located in designated Opportunity Zones have to go through Qualified Opportunity Funds (QOF).
Only recognized capital gains for federal income tax purposes can benefit from the opportunity zones tax breaks. This means that even foreign investors with capital gains subject to US federal income tax can utilize the program to save taxes.
Tax deferral and reduction
Original capital gain taxes of investments placed into a Qualified Opportunity Fund are deferred and discounted after 5 and after 7 years.
No capital gains tax on opportunity zone investment if held for 10 years or more.
Self-certified Opportunity Funds
A new QOF does not need official approval from the IRS. However, certain requirements and forms apply.
Incredible fundraising opportunity
Tax benefits encourage flow of investments into opportunity zone funds and therefore to businesses located in those zones.
Foreigners with US capital gains can benefit from the tax breaks.
Timing considerations for Opportunity Zones
You only have 180 days after selling assets to invest the realized capital gain in an opportunity zone fund.
The Opportunity Zone program ends on December 31, 2026 and gains can only be deferred to that date. To get the full 15% discount on original capital gains available after 7 years you must invest by the end of 2019. Holding the investment for 5 years yields in a 10% discount.
Opportunity Zones offer tremendous opportunities for investors looking for tax breaks and for entrepreneurs looking for funding.
We work both on the investor and the fund side. We help register Qualified Opportunity Funds, ensure reporting and tax compliance, and provide tax preparation services for investors and entrepreneurs alike.