Have you heard of Opportunity Zones (OZ)?
Even if the answer is yes, you may still be wondering what they are and how they might benefit you. We did a deep dive to discover the details so read on.
What Are Opportunity Zones?
Well, put simply, they are economically disadvantaged areas nominated by each state’s governor and certified by the US Treasury Secretary. Created by the 2017 Tax Cut and Jobs Act, the zones are designed to spur economic revitalization by offering preferential tax treatment on new investments. With 8,764 such zones designated nationwide, the opportunity here is truly vast.
What Are The Benefits?
The main advantage of opportunity zones to investors is the capital gains tax benefit. Taxpayers are able to defer and potentially reduce tax liability on eligible capital gains by making an investment in a Qualified Opportunity Fund or QOF (basically an approved project within an opportunity zone). Without getting too lost in the weeds, the longer an investor holds onto the investment, the greater the tax benefit. HUD’s website does a good job of laying out the tax incentives in detail here.
Is There Any Catch?
Well, there are a few things to know. It is only your capital gains that receive the tax benefit—not the entirety of your investment if you are committing funds beyond the capital gains. And you are required to make the QOF investment within 180 days of realizing the capital gains. Also, your investment must be in the form of equity and not debt.
How Can I Find A Zone?
It’s easy. Just head to HUD’s interactive map of Opportunity Zones and search by state or territory. Each state has their own site with specific information about investable projects and requirements. Your licensed realtor is also a good resource as they will have access to a searchable database of properties within these zones.
How Do I Choose A Zone?
That’s really a personal decision with some investors preferring to stick with local projects while others going further afield. We did come across an interesting article in the Motley Fool recently in which they identified the opportunity zones with the greatest ROI potential. See why they rank the Anacostia neighborhood in Washington DC at the top of the list.
No matter where you choose to invest in your next project, we hope that you will consider using Navigator Private Capital as your funding source. We are genuinely committed to your success and will be by your side from project start to finish. Reach out to us at email@example.com or give us a call at 443.603.0193 to learn more about us. And for a look at our available off-market properties, visit our website.