Capital Gains Tax Liability Too High?

If so, you may be interested in Opportunity Zones

Read below to learn how you can defer, and possibly eliminate, capital gains taxes

What are Qualified Opportunity Funds?

A Qualified Opportunity Fund (QOF) is a tax-advantaged investment vehicle created by the Investing in Opportunity Act as part of the Tax Cuts and Jobs Act of 2017. QOFs were designed to accelerate greater private-sector long-term investment and spur economic development in targeted communities called Opportunity Zones.

What are Opportunity Zones?

Opportunity Zones are areas in low-income communities, as designated by the state they are located in and certified by the Secretary of the U.S. Treasury, where new investments allow for preferential tax treatment.

How Does the Preferential Tax Treatment Work?

When an investor sells an investment which generates capital gains, the investor may defer or reduce the capital gains tax by investing the gain within 180 days into Opportunity Zones – typically through a QOF.

If the investment is held for five, seven, or 10+ years, the capital gains liability on the original investment will be reduced by 10%, 15%, or 100%, respectively.

Do I Need to Live in an Opportunity Zone to Take Advantage of the Tax Benefits?

No. You can get the tax benefits, even if you don’t live, work or have a business in an Opportunity Zone. All you need to do is invest a recognized gain in a Qualified Opportunity Fund and elect to defer the tax on that gain.1

Concluding, Opportunity Zones present a new way to invest your capital gains into low-income & under capitalized areas while benefiting from the tax incentives associated.

Sources
1. “Opportunity Zones Frequently Asked Questions.” Internal Revenue Service, www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions.
2. Mattson, Ruth. “What Are Qualified Opportunity Zones?” Wealth Management, 29 Aug. 2018, www.wealthmanagement.com/high-net-worth/what-are-qualified-opportunity-zones.