Apple Growth Partners

Take Advantage of Opportunity Zones

By Bob Neides, CPA

Robert Neides, Principal – Tax
Bob Neides, CPA

Opportunity Zone investments offer a unique “opportunity” to defer, reduce, and even eliminate having to pay tax on certain capital gains. Created from provisions in the Tax Cuts and Jobs Act of 2017, according to Investment News, “Opportunity Zones are specifically designed to incentivize investment in economically distressed communities and, for investors, they offer some intriguing and potentially significant financial benefits.”

In simple terms, individuals that recognize capital gains can, within a specified period, reinvest those gains in a replacement Opportunity Zone fund and defer paying taxes on the capital gains for up to seven years. Even better, if the replacement investment is held for five years, the individual will only be required to pay 90% of the tax due. If the individual holds the investment for seven years, only 85% of the initial tax is due at the end of year seven. To further incentivize the investment, if the individual holds the replacement investment for a full 10 years, any future capital gain recognized upon the sale of the replacement investment will not be subject to tax.

The IRS qualifies vicinities that have been nominated by individual states and are approved by the Secretary of the US Treasury. Opportunity Zones are located in all 50 states; in Ohio alone, most major cities are qualified, including Cleveland, Akron, Youngstown, Columbus, Cincinnati, and Dayton. The IRS designed Opportunity Zones to help fiscal development in economically depressed areas by providing tax benefits to investors. Investors are not required to live or work in a certified Opportunity Zone to take advantage of the gain deferment. The list of qualified locations can be found on the IRS website.

Resulting in dual purpose for both tax payers and cities, Opportunity Zones provide investors several tax benefits while investing in the betterment of low-income communities. However, before investing in an Opportunity Zone fund, you should discuss the potential investment with a trusted advisor to review associated risks. Contact me today to discuss next steps.