Opportunity Zones

In 2017, under the new Trump tax Cuts and Jobs Act, opportunity zones were created to spur investment into inner City communities and areas of the Unites States that could benefit from further development. The idea was to create tax incentives for investors to invest money into lower income areas to improve and developed certain locations. These are called Opportunity Zones. 

I. Trading from Different Asset Classes – Into Opportunity Zones

Unlike a 1031 Exchange, the beauty of an Opportunity Zone is that it allows an investor to use funds from a different asset class and invest into the Opportunity Zone fund projects. For example, an investor can trade stocks or equities and reinvest the gains into Real Estate. Depending on the investment time period, the investor can expect to pay very moderate or zero taxes at the end of a certain period of time.

II. Must Spend Double on Improvements

As part of the investment criteria, the purchaser must spend twice as much on property improvements versus the cost of acquisition. The idea of the Opportunity Zone is to develop communities and locations then need improvement. The goal is not to purchase cash flowing properties, but to create economic development that will ultimately yield cash flowing properties at limited taxes.

III. Key Rules for Opportunity Zones

It’s important to note, opportunity zone investment is a basis step-up. The longer you keep your funds in an Opportunity Zone, the great tax advantages you will receive.

1. Temporary Hold – Investors can defer capital gains taxes by placing into Opportunity Zone projects until the end of 2026 or when the asset is sold.
2. 5 -7 Year Hold –  If your capital gains is invested into an Opportunity Fund for at least 5 years, the basis on the original investment increases by 10 percent. If your funds are invested for at least 7 years, the basis on the initial investment increases by 15 percent.
3. 10 Year Hold – There is permanent exclusion of taxable income on new gains. If the investment is held for at least 10 years, investors pay no taxes on any capital gains produced through their investment in the Opportunity Fund.

IV. Opportunity Zones & Locations

Currently, twelve percent of US census tracts are Opportunity Zones (8,762 tracts). Governors of the 50 states and 4 territories and the mayor of Washington, DC, nominated the zones, which were officially designated by the US Department of the Treasury. The statute contains no provision to change which communities are classified as Opportunity Zones. Here is a map of opportunity Zone locations.

Contact Us

For Opportunity Zone projects and further information please contact us @garayrealestate.com Please make sure to consult your Accountant or attorney for all details rules and regulations of Opportunity Zone investments.

* Note: Garay Real Estate only provides some basic information and ideas as we believe is correct. Please make sure to consult all experts. We are not responsible for opportunity zone investment advice. All investors must do their own due diligence.

Please view one of our current Opportunity Zone projects in Atlantic City.