Property Management Blog

What is an O-Zone?

Uptown Properties - Monday, April 1, 2019
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"A relatively unheralded section of the 2017 federal tax overhaul offers patient investors a deal that could be too good to turn down. The launch of the qualified opportunity zone program means that in return for rolling over the profits from the sale of a capital asset like real estate or company stock into certain economically disadvantaged areas, investors can delay paying capital gains taxes on those profits through 2026.

What’s more, if an investor retains an opportunity zone investment for at least five years, 10 percent of the initial investment is excluded from being taxed. After seven years, that figure increases to 15 percent.

Opportunity zones are similar in some ways to 1031 like-kind exchanges, which permit real estate investors to defer taxes on gains from the sale of a property by reinvesting the proceeds from the sale in another property within six months. A key difference is that 1031s do not allow investors to permanently exclude any portion of their profit from taxes, which the opportunity zone program allows for investments held for at least 10 years.

To take advantage of the tax benefits, investors need to invest capital gains in vehicles known as qualified opportunity funds, which aggregate money from investors and use it to acquire and improve properties in opportunity zones, within 180 days of the sale of an asset. Investors can choose to work with an existing opportunity fund that plans to invest in an area or type of property they want to put money into or form their own fund. For their part, opportunity funds must invest at least as much in improving a property as they pay for it, and are required to invest 90 percent of their assets in properties located in opportunity zones."

-Sam Silverstein

As a writer-producer for the National Association of REALTORS® based in Washington, Sam Silverstein develops articles and videos for NAR's members and others interested in its activities, statistics and research. 

Read the full article about how you can take advantage of O-Zones here: