The TCJA brought a tax overhaul that had not been seen in decades. Much of the attention was centered on the tax treatment of real estate and other assets. One aspect of the tax bill that was added and did not receive nearly enough attention was the bill’s Investing in Opportunity Act. This created a way for investors to invest their capital in a new program known as opportunity zones and opportunity funds.
An opportunity zone is a program that was created to help revitalize economically distressed communities using private investments rather than taxpayer dollars. The private sector of money holds a lot of value within the United States so what is it in for the private investors who choose to try out this program? Massive tax incentives, and the longer they remain invested the greater the incentive once the investment is pulled out.
These massive taxes can include a drop in their capital gains tax once held for a certain amount of time. For instance, for those who hold Opportunity Fund investments for at least five years prior to December 31, 2026 can reduce their liability on the deferred capital gain principal invested in the Opportunity Fund by 10%. If you hold over 10 years, you can expect to pay no capital gains taxes on any appreciation in their Opportunity Fund Investment.
Opportunity zones and funds were severely overlooked by investors and should be considered for those who like to keep a diverse portfolio. If you have questions about capital gains taxes or how to find these zones, contact the professionals at the Center for Financial, Legal & Tax Planning, Inc.