Opportunity Zones

Posted on October 5th, 2018

One reason I love my job is that I get to carve out a slice for “Nerd Out” time. This is time spent reading research, crunching numbers on my own, and thinking of tax strategies, amongst other things.  Nerd Out time is not only my way of relaxing and keeping mentally curious, it helps me discover ways to make a positive impact on our client’s lives.

My most recent research has been on Opportunity Zones, and Qualified Opportunity Zone Funds (“QOZ Funds”), and the incredible tax savings potential for those with large realized capital gains.  In particular, business owners exiting their businesses will be able to mitigate their capital gains like never before.  Legislators enacted this in last years’ Tax Reform bill in order to attempt to minimize wage disparity and jump start neighborhoods

In short, investors will be able to:

  1. “Recycle” their original capital gains in a QOZ Fund, which will enable them to,
    • defer those original capital gains taxes for up to December 31, 2026 [1], and
    • reduce the original capital gains by 15% if held until that date.
  2. Completely avoid capital gains taxes on the gains from the QOZ Fund if  the investment is held for at least 10 years.

Currently, the legislation isn’t workable but the IRS has signaled they will be releasing further guidance in the near future.  Expect to hear more from us on this topic!

[1] See the Opportunity Zone Fact Sheet for complete info on holding terms.