Opportunity Zones offer investors preferential tax treatment for capital gains invested in low income communities. The program is designed to encourage long-term investment in economically distressed areas and promote economic growth. These investments provide support to projects focused on a wide array of issues including downtown revitalization, housing improvements and expansion of industrial parks and innovation districts.
The following incentives are offered to investors for putting their capital to work in these qualified opportunity zones.
- Temporary capital gain tax deferral
- The period of capital gain tax deferral ends on 12/31/26 or an earlier sale
- A step-up basis
- Investment held for five years - basis increased by 10% of deferred gain (90% taxed)
- Investment held for seven years - basis increased by another 5% of deferred gain (85% taxed)
- Forgiveness of additional gains
- Investment held for 10 years - basis equal to fair market value; forgiveness of gains on appreciation of investment of sale or exchange of Opportunity Fund investment. This exclusion applies only to gains accured after an investment in an Opportunity Fund.