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Know More About Qualified Opportunity Zones
WHAT OZ FUND CAN DO FOR YOU
Defer Capital Gains Tax Liability with Qualified Opportunity Zone
Investors can take advantage of three major federal income tax benefits for qualifying investments made in a Qualified Opportunity Fund (QOF). Enjoy long-term capital gains tax deferral, reduction and even elimination by investing in a Qualified Opportunity Zone.
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Reduce your tax liability by Investing in QOZ Fund
Deferral of Capital Gains Taxes
Investors can defer paying capital gains taxes on the sale of a property by investing the proceeds into a QOZ within 180 days of the sale.
Tax Reduction
If the QOZ investment is held for at least 5 years, the investor can receive a 10% reduction in capital gains taxes. After holding for at least 7 years, the reduction increases to 15%.
Tax Elimination
If the QOZ investment is held for at least 10 years, the investor can eliminate capital gains taxes on any investment appreciation.
Flexibility
QOZ investments can be made in a variety of ways, including through the purchase of the real estate, stock in a Qualified Opportunity Fund (QOF), or partnership interests in a QOF.
Community Development
QOZ investments can help to revitalize and develop low-income communities by providing capital for businesses and real estate projects.
The United States now boasts around 8,877 designated Opportunity Zones, providing a wealth of investment opportunities for accredited investors. By channeling their investments through a Qualified Opportunity Fund (QOF), these investors can reap the benefits of deferring or even potentially eliminating capital gains tax liabilities. QOFs are mandated to invest a minimum of 90% of their assets into qualifying assets located within these Opportunity Zones communities.
Learn more about Investing in Opportunity Zone Funds
Advantages of Investing in Qualified Opportunity Zones?
Investing in a Qualified Opportunity Zone (QOZ) can be a significant opportunity for investors looking to reduce their tax liability and support community development in low-income areas. The QOZ program was created by the Tax Cuts and Jobs Act of 2017 to encourage investment in these communities by providing tax benefits for investors who invest in designated QOZs.
The main benefit of investing in a QOZ is the ability to defer and potentially reduce capital gains taxes. If an investor sells a property, they must pay capital gains taxes on the property appreciation. However, if the investor invests the proceeds from the sale into a QOZ within 180 days, they can defer paying those taxes until the QOZ investment is sold or until December 31, 2026, whichever comes first.
Additionally, if the QOZ investment is held for at least 5 years, the investor can receive a 10% reduction in capital gains taxes. After holding for at least 7 years, the reduction increases to 15%. And, if held for at least 10 years, the investor can eliminate capital gains taxes on any investment appreciation. These benefits make investing in a QOZ a beautiful opportunity for investors looking to reduce their tax liability.
Another benefit of investing in a QOZ is the potential for community development. QOZs are designated low-income areas in need of investment and development. By investing in a QOZ, investors can play a role in revitalizing and developing these communities through businesses and real estate projects. This has a positive impact on the community and can lead to higher returns as the area improves.
Investing in a QOZ can also provide diversification opportunities for investors looking to diversify their investment portfolio. QOZs offer a wide range of investment options, including real estate, stock in a Qualified Opportunity Fund (QOF), or partnership interests in a QOF. This allows investors to choose an investment that aligns with their investment strategy and risk tolerance.
It provides a wide range of benefits, including the ability to defer and potentially reduce capital gains taxes, the potential for community development, diversification opportunities, and long-term investment. However, it’s important to note that specific guidelines and rules must be followed to qualify for the QOZ tax benefits. The investment should be done with the help of an experienced tax professional or attorney.
A taxpayer’s tax benefits are determined by how long they hold their QOF investment.
- A QOF investment’s basis rises to 10% of the deferred gain after holding the investment for at least five years.
- In the case of a QOF investment held for at least seven years, the basis increases to 15% of the deferred gain.
- The investor can choose to adjust the QOF investment’s basis to its fair market value when they sell or exchange the QOF investment after holding it for at least 10 years.
