The Tax Cuts and Jobs Act of 2017 designated special “opportunity zones” nationwide that had been targeted for investment and redevelopment.
Often neglected and largely bereft of economic vitality, some of these areas had been languishing for decades.
Investors of all stripes can enjoy the benefits enabled by opportunity zones while providing capital to communities that truly need it. Leveraging opportunity zones is a lot easier than many realize.
A Simple Way to Become Involved With Worthy Opportunity Zones
Qualified opportunity zones all across the country are in need of attention from developers and others. All that it takes to become certified is for a community to be nominated by its state and then approved by the Secretary of the United States Treasury.
Once a zone has been established, developers and business owners who turn their attention to it become eligible for numerous tax-related benefits. There are also ways for others who live even far away to do the same for themselves.
The Internal Revenue Service recognizes Opportunity Zone Funds that are ready and eligible to accept and distribute funds obtained from individual investors. These funds work like various types of investment vehicles sophisticated investors are already familiar with.
In many cases, making a contribution to an opportunity zone fund ends up being as simple as doing the same with a mutual fund.
Deferring Capital Gains Taxes to Keep the Tab Down
Well-managed funds that focus on opportunity zones can produce impressive returns. Investing in economically distressed communities tends to create plenty of potential for appreciation. A single successful project will sometimes return multiples of the capital used to fund it, thanks to typically low costs and high upside.
On the other hand, many investors today gravitate toward opportunity zones because of the considerable tax benefits that are associated with them. The legislation that established opportunity zones nationwide tied them to a particularly generous capital gains tax deferral program.
Investors who have realized capital gains recently can roll those proceeds over into opportunity zone investments without immediately paying taxes on the returns. The tax basis of the investment into a fund increases on a set schedule, lowering liability with each jump.
Late in the fund’s life, an investor will be required to pay tax on the deferred capital gains. When the fund finally matures, however, investors can bank their returns without any additional tax liability.
A Simple Way to Improve Investment Performance While Helping Out
The opportunity zone program has become viewed by many as an especially successful component of the 2017 Tax Cuts and Jobs Act. It has already delivered vast amounts of capital to distressed communities nationwide that were desperately in need of it.
Investors frequently find that the opportunity zone program suits their needs perfectly, as well. Almost any investor who has realized significant capital gains recently can potentially benefit from rolling them over into a qualified fund.
Extracting the most possible value from opportunity zone investments does require a fair amount of patience. While not every investor will be well-positioned to lock up capital for years at a time, many will find that a small price to pay for the returns to be expected.
Those who opt to participate often find that being able to help revitalize downtrodden communities proves welcome, as well. With there now being quite a few funds that make getting involved easy, looking into this option will always be worthwhile.