Opportunity Zone Benefits

Image: A snowy aerial view of Bishop in March 2023 by Howie Schwartz

The Opportunity Zone Advantage

Opportunity Zones are a recent national investment tool designed to spur economic growth and community development by encouraging long-term private investment in distressed urban, suburban, and rural communities. Investors can defer tax on capital gains if those gains are invested in a Qualified Opportunity Zone Fund.

Defer Tax

Investors can defer tax on invested eligible gains until the earlier of December 31, 2026, or if there is an “inclusion event” that reduces or eliminates the qualifying investment.

tax free gains

Investors who hold their investment in a QOF for at least 10 years are eligible to elect to adjust the basis of the QOF investment to its fair market value on the date that the QOF investment is sold or exchanged. This benefit allows investors to receive federal tax-exempt growth in their QOF investment as there will be no federal tax on investors’ proceeds upon sale. This exemption extends to depreciation and tax credit recapture.

Accelerated depreciation

In addition to the two OZ benefits, investors in a real estate transaction may receive significant annual tax deductions in the form of depreciation. Furthermore, property may be eligible for first-year bonus depreciation.