With the start of every new year, it always brings about feelings of renewed hopes, goals and dreams. Planning ahead for all future possibilities and outcomes can be a very fun and exciting time. Since we are living in the gilded and advanced tech-age, there are so many different avenues to invest your money. From your traditional investments such as IRA retirements, stocks, bonds, mutual funds and the latest buzz of cryptocurrency, there is definitely no shortage of ways to invest your hard earned money, but you may not be aware of another option; investing in opportunity zones. Yes, my friends, there are alternative ways to invest!
If you are an investor or looking to start investing and maximizing your ROI, then take a look at investing in opportunity zones. Opportunity zones that are located in the United States are a great option for any investor. These opportunity zones present the perfect vehicle to invest in because the reward is two-fold.
Before we dive into this type of investment, we should look to understand what exactly an opportunity zone is. So for this blog, we will be breaking down what an opportunity zone is, what the benefits of investing into an opportunity zone and how you can get started with this type of real estate investment.
Opportunity zones are designated low-income and communities and certain neighboring areas that are located all across the United States. These zones have been deemed distressed and in need of investors. The main objective for creating opportunity zones is so that people can come in and invest into these areas to help spur economic progress and development.
This type of real estate tax incentive was created by the Tax Cuts and Jobs Act of 2017. This act was created to jumpstart job creation and certain geographical areas within the United States
When you invest in an opportunity zone you create jobs in low income areas as well as help to aid in the economic growth of that area.
The benefits of investing in opportunity zones are plentiful. The main benefit is tax benefits on your capital gains. This can be applied as a business or as an individual.You are able to decide if you want to defer taxes on your capital gains. As an investor, you will be able to defer tax on invested gain amounts.
A major benefit to investing in opportunity zones are the numerous tax benefits. You are able to defer tax on eligible gains when investing in a Qualified Opportunity Fund. It includes both capital gains and classified 1231 gains, but only if the gains are recognized for federal income tax purposes before January 1, 2027 and as long as it is not related to a person. It’s a win-win!
An investor is able to defer tax on invested gain amounts until the date they sell or exchange the Qualified Opportunity Fund investment or by December 31, 2026, whichever is earlier. Something important to note is that the length of time that the investor holds onto the Qualified Opportunity Fund, will determine the tax benefits you will receive.
There are a few more aspects to the opportunity zones such as Qualified Opportunity funds, Qualified Opportunity Zone property, and business zone property. It sounds like it is complex, but once you break it down, it is very understandable. Even if you are unable to start the process for yourself, we at Accolade Accounting can help guide you to the right direction and resources.
If you are ready to get started or want to get more information on how you can invest in an opportunity zone, please contact us, or read more about opportunity zones from the IRS here.
Until next time my friends, I am wishing you all a happy and prosperous New Year!
Cheers!
JD Longino, CPA
