OPPORTUNITY ZONE FUNDS
HOW IT WORKS
Opportunity Zones were established by Congress in the 2017 Tax Cuts and Jobs Act as an innovative approach to spur long-term private sector investments in low-income communities nationwide. The Opportunity Zone investment tool allows private investors to receive tax benefits by reinvesting capital gains into a Qualified Opportunity Fund (QOF) that in turn makes qualified investments in real estate or businesses located in distressed communities nationwide.
Deferral of Gain
Temporarily defer invested capital gains until date QOF investment is sold or December 31, 2026, whichever is earlier.
Step-Up in Basis
Original investment's tax basis increases by 10% after 5 years.
After 10 years, permanently exclude capital gains on any appreciation of the QOF investment.
*Benefits vary depending on duration of investment. Per draft Treasury guidance and the guideline update in October 2018, investments in a QOF must be made by 12/31/21 to be eligible for the 10% step up in basis for holding 5 years. Per draft Treasury guidance, a QOF investment made before the Qualified Opportunity Zone's designation expiration and held for 10 years or more years can qualify for permanent capital gains exclusion through 12/31/47. This is not tax advice. You should consult with your tax advisor.