The federal Tax Cuts and Jobs Act of 2017 introduced a new community redevelopment program intended to encourage investment in certain low-income communities across the country by sparking economic development and job growth within these communities. In certain circumstances, a taxpayer may invest capital gains from a sale or exchange into a qualified opportunity fund (QOF), which QOF has, in turn, invested in property such as stock, partnership interests or business property (including real property), located within a qualified opportunity zone (QOZ), after December 31, 2017, allowing the taxpayer to potentially exclude from income up to 15% of the capital gains and defer the recognition of the capital gains income to December 31, 2026. In addition, there is the potential of excluding all gains from the QOF investment if such investment is held for at least ten years.
This is a powerful new tool that, when coupled with other investment incentives such as Low-Income Housing Tax Credits, EB-5 visa investment projects and other state-based programs, could result in significant tax savings to investors.
Please click here for a more detailed analysis of QOZs and possible tax savings for investors.