What are “Opportunity Zones”?
Simply put, Opportunity Zones are areas that are designated for tax incentives for investors. These tax incentives are meant to spur investment into areas that are considered economically distressed. These areas, which were proposed by each state and approved by the federal government, are known as “Qualified Opportunity Zones.”
Opportunity Zones Services
- We can help you find the right investment property within an Opportunity Zone
- Assist with the formation, organization, and management of the Opportunity Zone Fund
- Answer tax questions related to the Opportunity Zone rules & regulations
The passage of the Tax Cuts and Jobs Act of 2017 created a new policy for Opportunity Zones that will have an incredible impact on the real estate industry for years to come. In April 2019, the United States Treasury Department released the long-awaited second round of proposed regulations related to the Opportunity Zone initiative. which was enacted as part of the Tax Cuts & Jobs Act of 2017.
For investors to receive the highest incentives in Opportunity Zones, they must make long term investments. The incentives are tax exemptions that increase every few years until the 10-year mark after which the investor is exempt from any capital gains taxes whatsoever. According to Ben Carson, the Secretary of the Department of Housing and Urban Development, the success of the policy relies on “the long term incentive to stay invested, and therefore to be interested in what happens with your investment.”
In order for an investment to qualify for the beneficial tax treatment, capital gains must be used to fund the investment and the investor needs to “substantially improve” the invested property, unless the property is original use property, meaning it has not been depreciated. To “substantially improve” the investment, the investor needs to double their initial tax basis in the property within thirty months after purchase.
Assess Your Opportunities
Tyler Davis is an Accountant with our brokerage specializing in Opportunity Zones as resource for our advisors and clients. Tyler recently joined the brokerage after spending five years in the tax practice as a manager at PricewaterhouseCoopers in Birmingham, Alabama.