Qualified Opportunity Zones

Qualified Opportunity Zones (QOZs) are designated low-income communities in the United States that have been identified for economic development and revitalization. The QOZ program was created as part of the Tax Cuts and Jobs Act of 2017 to encourage long-term investment in these areas.

Investors who put their capital gains into Qualified Opportunity Funds (QOFs) can receive certain tax benefits. A QOF is an investment vehicle specifically designed to invest in businesses or properties located within QOZs. By investing in a QOF, individuals and businesses can defer and potentially reduce their capital gains taxes.

The tax benefits associated with QOZ investments include three main incentives:

  1. Temporary deferral of capital gains: Investors can defer paying taxes on their capital gains by reinvesting the amount into a QOF within 180 days of the sale or exchange that generated the gains. Taxes on the invested capital gains are then due when the QOF investment is sold or by December 31, 2026, whichever comes first.
  2. Partial reduction of capital gains: If the QOF investment is held for at least five years, there is a 10% reduction in the deferred capital gains tax liability. If held for at least seven years, the reduction increases to 15%.
  3. Potential elimination of capital gains on QOF investments: If the investor holds the QOF investment for at least ten years, any additional gains realized from the QOF investment itself can be tax-free.

Overall, the QOZ program aims to stimulate economic growth in distressed communities by incentivizing investment in real estate projects, infrastructure development, and businesses operating within these zones.

Please note that specific details and requirements regarding QOZ investments can be complex, so it’s essential to consult with a tax professional or financial advisor for personalized advice based on your circumstances. Contact us to see if you’re eligible to invest in Qualified Opportunity Zones.