Qualified Opportunity Zone Funds are Worth Investigating
While Tobin & Company is not a tax advisor, nor do we profess to be, we do on occasion encounter strategies that our mergers and acquisitions clients might want to investigate with their tax advisors.
Those who have owned their companies for years and decide to sell, often have a substantial amount of money tied up in capital gains. While that’s good for the owner it can translate into a substantial tax liability. Investing in qualified opportunity zone funds can be a good option for reducing capital gains taxes on such sales.
What are Qualified Opportunity Zone Funds?
Opportunity zones, established by Congress in 2017, are an economic development tool that allows people to invest in distressed areas in the United States. Their purpose is to spur economic growth and job creation in low-income communities while providing tax benefits to investors.
Anyone with capital gains can invest in Opportunity Zone Funds.
How Can Opportunity Zone Funds Help Reduce Capital Gains Taxes?
Taxpayers who rollover their capital gains into a qualified opportunity zone fund can take advantage of three tax benefits — deferral, reduction and exclusion.
- Deferral of capital gain recognition from the original investment until December 31, 2026.
- Reduction of capital gain recognition from the original investment. The amount of capital gain recognized from the original investment is reduced by 10 percent after achieving a 5-year holding period, with some limitations.
- Exclusion of capital gain recognition on Qualified Opportunity Zone Property held for at least 10 years, so long as the gain from the Opportunity Zone investment is recognized by December 31, 2047.
Ask Your Tax Advisor if Qualified Opportunity Zone Funds Can Reduce Your Tax Bill
Since 2017 Tobin & Company has helped equity issuers manage opportunity zone fund compliance and navigate the maze of associated regulations. We also have seen taxpayers save thousands, sometimes more, on tax bills.