Qualified Opportunity Zones

The Tax Cuts and Jobs Act of 2017 gave taxpayers new ways to defer taxes and realize the potential of large gains by investing in areas that are deemed “economically distressed”. When the first set of designations was released back in 2018, they only covered parts of 18 states. Today, QOZs can be found in all 50 states, Washington D.C., and 5 U.S. Territories.

What is the purpose of QOZs and How do I find one to invest in?

QOZs are areas that have been nominated as being economically distressed. To bring investment into these areas, the Federal Government has created certain tax incentives that allow investors to defer capital gains until December 31, 2026, and if held for a period of 10 years or more, to receive an adjustment based on that investment to the fair market value for the investment on the date it is sold. This means that any appreciation on the investment at the time of sale, will not be taxed.

There are a few different ways to invest in a QOZ. One such is to find a readymade fund that currently has investments in a QOZ and invest your capital gains into it. This is the more traditional hands-off approach to investing that many people are likely familiar with.

Another way is to start your own Qualified Opportunity Fund. Using this approach, you would create an entity to invest in QOZ property. You would then identify properties in QOZs to purchase and would be required to substantially improve them within 30 months.

For more information regarding Qualified Opportunity Zones, please reach out to the Professionals at The Center for Financial, Legal, & Tax Planning Inc., at (618) 997-3436.

*** The information provided above is for general informational purposes only. It is not to be considered financial, legal, or tax planning advice. ***