Qualified opportunity zones represent economically-distressed areas in the US, and these areas are designated by the states and then certified by the US Treasury Department. Some investments in qualified opportunity zones are eligible for preferential tax treatment. This tax incentive has been designed to help push job creation and economic development in these distressed areas. These tax benefits are offered to investors in opportunity zones; any taxpayer can choose to invest in an opportunity fund.
To qualify as an eligible opportunity zone business, that respective business must prove that the business property is in a qualified opportunity zone. Three different tax benefits are typically available to investors in Qualified opportunity zones.
- First, there is the deferral of capital gains taxes- investors who decide to reinvest their capital gains – within up to 6 months of making those gains- into an opportunity fund can defer from paying federal taxes on those gains.
- The reduction of capital gains taxes- those investors that can make proof of holding their investments in the Opportunity Fund for a minimum of 5 years will benefit from a reduction of their tax bill by 10%. Those investors who can make proof of holding their investments in the opportunity fund for a minimum of 7 years will be able to enjoy a reduction of 15% on their tax bill.
- The elimination of taxes on future gains- the investors who can prove to hold their investments in the opportunity fund for a minimum of 10 years will not have to pay any federal capital gains taxes on the gains they realize as part of their investment in the respective opportunity fund.
It is essential to remember that according to current opportunity snows legislation, there is no minimum or maximum investment required to qualify. However, if you are interested in finding out even more legal details regarding qualified opportunity zones, how they work, or the investment procedure requirements, you should talk to an attorney.