Have you heard of Opportunity Zones?
They’re specific locations across the country that provide massive tax incentives for investors. Texas, alone, has more than 600 zones. Specifically, by investing in an Opportunity Zone, an investor can defer payment on realized capital gains until 2026 and may reduce his or her taxable gain by 15%. Even more, any capital gains earned on the initial investment is forever tax-free—a permanent exclusion!
Investors have two main options for taking advantage of this opportunity. First, an investor can invest his or her gains in an established Opportunity Fund with a reputable third party. This option is perhaps the easiest way to take advantage of the program and provides the investor with all of the tax benefits and minimal work. However, it is not without its risk. Investors should perform their due diligence to ensure that the investment is protected and that the third party is competent and capable.
The second option is for an investor to create his or her own opportunity fund, and then self-manage the investment. This option provides greater control over the investment but is obviously more labor-intensive.
While investors have until 2026 to invest their gains, December 31, 2019, is the last day to invest in order to receive maximum tax benefits. If you have capital gains that you would like to invest, consider whether an Opportunity Zone (or an Opportunity Fund) is right for you.
Please feel free to reach out to Danielle Taylor (Danielle@tcvlaw.com) for more information.
By Danielle Taylor