Understanding Opportunity Zones
Updated: 6 days ago
1. What's an opportunity zone?
Opportunity zones are economically- distressed communities that may qualify for special tax treatment. Businesses, equipment, and real property may be eligible to receive investment through special funding. These zones are a tool to stimulate economic growth and job opportunities in economically distressed communities.
The link below provides an interactive map of Opportunity Zones in the state of CA:
2. How to invest in an Opportunity Zone?
Opportunity zone investments are made through Qualified Opportunity Funds.
All investments must go through a Qualified Opportunity Fund in order to qualify for any benefit.
Visit the IRS website for more info on how a QOF works, filing requirements, tax benefits, etc.
3. What is a Qualified Opportunity Fund?
A Qualified Opportunity Fund is an investment vehicle that files a corporate or partnership federal income tax return and is organized for the sole purpose of investing in Opportunity Zones. To qualify, an investment vehicle must self-certify by filing IRS Form 8996. See below for further instructions on filing IRS Form 8996.
4. Can I invest in a Qualified Opportunity Fund if I don't reside, work, or own
property within an Opportunity Zone?
Yes, you can invest in an Opportunity Zone even if you don't reside, work, or own property within an Opportunity Zone.
5. Is it possible to invest in more than one Opportunity Zone?
It is possible to invest in multiple Opportunity Zones if a Qualified Opportunity Fund holds a minimum of 90% of its assets in Opportunity Zone property.
6. Investing in a Qualified Opportunity Fund can offer the following benefits.
Elimination of Taxes on Future Gains- If you hold your investment in a Qualified Opportunity Fund for at least ten years, your realized gains from the investment will not be subject to federal capital gains taxes.
Capital Gains Tax Reduction- If you hold your investment in a Qualified Opportunity Fund for at least five years your tax bill can be reduced by 10% on capital gains deferred. Or it can be reduced to 15% if you hold your investment for at least seven years.
Capital Gains Tax Deferral- If capital gains are reinvested into a Qualified Opportunity Fund then federal taxes on realized gains of the investment can be deferred as late as December 31, 2026.
For more information visit: CA Opportunity Zones | Opportunity Zones provide tax incentives for investment in designated census tracts.