What is an Opportunity Zone?
An Opportunity Zone (OZ) is a census tract designated by the governor and certified by the U.S. Department of Treasury that allows investors in the development of the tract to reap capital gains tax deferrals in both the short and long term. Created through the Federal Tax Cut and Jobs Act of 2017, the OZ program extends through December 31, 2026.
What are the benefits to businesses and investors? If capital gains are invested in a Qualified Opportunity Fund (QOF) within 180 days:
- Investors can defer tax on the gains until the sale of the new investment or until December 31, 2026, whichever is earlier.
- If capital gains are held in a QOF for at least 5 years, the investors’ basis on the original investment increases by 10%.
- If the gains are held for 7 years that basis rises to 15%.
- If the investment is held for at least 10 years, capital gains taxes are eliminated on any new capital gains produced through the investment in the QOF.
- Investments can be combined with other development incentives, and there is no cap on the amount that can be invested.