Opportunity Zones are an economic development tool that allows people to invest in up-and-coming communities. Their purpose is to spur economic growth and job creation while providing tax benefits to investors.
There are two important tax incentives when someone invests in a Qualified Opportunity Fund (QOF):
Deferral of Capital Gains
Any gain treated as a capital gain (including 1231 gains) generated from a sale can be deferred until December 31, 2026 by investing in a QOF. Examples of capital gains eligible for investment in a QOF are: sale of a business, stock sales, and real estate sales.
Tax Free Gain
If an Opportunity Zone (OZ) project is held for a minimum of 10 years, appreciation and gain on the project will be tax free.
- Investors have 180 days to invest the gain in a QOF
- If held personally, the investor has 180 days from the date of the sale that triggered the gain
- If the gains flow through a Partnership, S Corporation, RIC, or REIT, the shareholder has 180 days from the passthrough entity’s tax year-end
- Taxpayers can also elect to have the 180-day period begin on the due date of the flow through entity’s return (for calendar year partnership/S-corps, this is 3/15)
Opportunity Zone Investment Timeline Example
Other Tax Benefits of Opportunity Zone Projects
- Significant depreciation deductions over the life of the project
- Deductions generally equal 100% or more of investor cash investment within 5 years of the building being placed in service – see example project summary below
- Deductions generally around 3X an investor cash investment over the depreciable life of the building (30 years)
- Losses generated by depreciation can shelter other sources of pass through income for investors on annual basis. Unused losses are also eligible to carry forward to future years
- OZ investors get the same tax benefits from depreciation as any other market-rate project through the life of the deal, however, OZ investors do not need to recapture the depreciation as additional gains on a sale if held for 10 years – presenting a huge tax savings benefit
In summary: Investing in up-and-coming “opportunity zones” offers significant tax-deferral opportunities, and if you hold your investment for 10 years, your gains could be 100% tax free.
NO OFFER OF SECURITIES; DISCLOSURE OF INTERESTS: Under no circumstances should any material on this flyer be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of the confidential Private Placement Memorandum relating to the particular investment. Access to information about investments with projects undertaken by Roers Companies LLC, Roers Companies Project Holdings LLC, or any of their respective affiliates is limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended, or those investors who are generally are sophisticated in financial matters, such that they are capable of evaluating the merits and risks of prospective investments. Investment outcomes vary. Past success does not guarantee future results. Historical return details available.