Tax benefits from Qualified opportunity zones

[Sachin Amin]

Hello tax experts

Any recommendations on how to avail tax benefits on capital gains, was researching and found out QOZs (qualified opportunity zones) there is a new tax law which allows capital gains to be invested in QOZs and can get investor tax break till 2026 or so... any further-insight on the subject is appreciated and any source where I can avail more info

Cheers

Sachin

[Natalie Kolodij]

Originally posted by @Sachin Amin:

Hello tax experts

Any recommendations on how to avail tax benefits on capital gains, was researching and found out QOZs (qualified opportunity zones) there is a new tax law which allows capital gains to be invested in QOZs and can get investor tax break till 2026 or so... any further-insight on the subject is appreciated and any source where I can avail more info

Cheers

Sachin

Quick run down there are 2 benefits that come from the QOZ and both need to be present. 

Step 1: You need a capital gain to defer now. 

Step 2: You invest that in one of the zones via a QOF, you can self report this on your own taxes for a single property. 

Step 3: You must substantially improve the prop within 30 months. Meaning put as much into renovations as the building basis. OR build new if it started as raw land. 

Step 4: Hold that new property for 5-10 years with increases in basis at the 5,7,10 year marks. 

Step 5: At the end of 2026 (or if you sell sooner) you recognize the gain you originally deferred but the raised basis now makes the gain only 85% of what it was originally. So you save 15% here

Step 6: Second benefit- as long as you've held that new property for 10 years if you sell it any NEW gain related to appreciation in that property is tax free.