If you haven’t already heard of Opportunity Zones by now, it’s time to listen up. An addition to the tax code nearing the end of 2017, Opportunity Zones are an amazing tool for real estate investors to reap favorable tax incentives. Determined and assigned by the state, Opportunity Zones exist across every state in the U.S. and are considered distressed, low-income geographic areas that need assistance improving both economic development and value. Here’s why this should immediately interest you: Major. Tax. Benefits.
Let’s say that you currently hold an appreciated investment and are ready to liquidate. The good news for you is when selling your appreciated asset(s) you have the ability to invest those capital gains forward into a Qualified Opportunity Fund (QOF) as an investment vehicle set up either as a partnership or corporation for investing in eligible property located in a Qualified Opportunity Zone. By investing a gain into the QOF you are able to defer the original capital gains tax obligation for up to 10 years. Yes, 10 years, meaning that these strong incentives encourage long-term equity investments to allow these damaged areas to heal and grow. If you are committed to holding your investment for 10 years not only are you allowed to defer the tax, but you get to discount the tax. If held for 5 years, the taxable amount of your original capital gain decreases by 10%. If held for 7 years or more, the taxable amount decreases by 15%. You are not locked into the deal forever, might I add, and are able to sell your investment at any time; you would just have to pay the tax on the gain. But it’s important to understand that your potential benefits could grow the longer you hold an investment in an Opportunity Zone. If you were to take your appreciated capital gains and direct them into an opportunity zone investment whatever you make as appreciation in the opportunity zone investment is 100% tax free.
Not only should these tax incentives motivate you to invest in Opportunity Zones, but the process requires no IRS approval. Instead, you can self certify the fund by filing Form 8996 with the IRS, pushing the process at a faster pace.
Opportunity Zone Investments are in favor of both parties, as they revitalize low-income areas while boosting private investment. As a syndicated effort, this initiative attempts to raise and bring capital into broken communities to restore them. In Hillsborough County we have a plethora of Opportunity Zones scattered across the entirety of Tampa, desperately seeking attention. These Zones are identified by an 11-digit census tract number and can be recognized as the pink portions of the below map.
Team Chais is ready and excited to tackle this rewarding and lucrative project. If you or anyone you know is looking to partner with skilled and successful investors, contact Team Chais today to discuss formulating a plan into action. We are available anytime by phone, 813-928-4308, or you can text “teamchais” to 80800. We look forward to building strong relationships to secure tax and long-term benefits while regenerating struggling areas.