What are Opportunity Zones?
-
Opportunity Zones are communities throughout the U.S. created under the 2017 Tax Cuts and Jobs act that encourage long-term investments in economically-distressed neighborhoods
-
Stimulating underserved economies isn’t the only benefits of Opportunity Zones
-
There are three different ways an investor can benefit from investing in Opportunity Zones
What is an Opportunity Zone?
An Opportunity Zone is an economically-distressed community as nominated by the U.S. Department of the Treasury; there are 8,760 Qualified Opportunity Zones among the 50 U.S. states. In an effort to stimulate economic development and job creation Opportunity Zones were created under the 2017 Tax Cuts and Jobs Act encouraging long-term investments in low-income neighborhoods. Opportunity Zones may be more abundant than you think and could be just around the corner. Check out this Opportunity Zones map as provided by the U.S. Department of Housing and Urban Development.
Why invest in an Opportunity Zone?
Opportunity Zones provide a range of infrastructure possibilities to help stimulate the local economy, create new jobs in high poverty areas and generate major societal impact. However, in addition to benefiting the community, Opportunity Zones provide tax incentives for those with capital gains.
What tax incentives can Opportunity Zones provide?
There are three different tax incentives that investors can claim on their Opportunity Zone funding.
- Tax deferral on capital gains until 2026. Investors can invest assets with capital gains into opportunity funds, and defer taxes on those gains until the year 2026 or until the asset is disposed of.
- Basis step-up of previously earned capital gains. Capital gains held in an opportunity fund for at least five years have an increase of 10% on the original investment. If the investor holds the capital gains in an opportunity fund for at least seven years they see a 15% increase.
- Income tax exclusion on new gains. Investors pay no taxes on any capital gains for investments held for at least 10 years in an opportunity fund.
At Physis, we aim to shed light on different investments opportunities to best suit you and your clients’ needs. Our Insights keep you up-to-date on the latest trends and news in the ESG Investing space, and our innovative platform allows investors to measure, track, and understand the impact of your investments. Sign up for a demo today!
Sources:
SouRocket Mortgage “A Guide To Investing In An Opportunity Zone”