The 2017 Tax Cuts and Jobs Act incentivized investment in businesses and real estate within low-income communities designated “Qualified Opportunity Zones” by allowing investors to receive three significant tax benefits:
- Investors may defer gain from the sale of property by reinvesting (within 180 days) amounts otherwise subject to capital gains liability. The gain is deferred until the earlier of: (a) the date on which the investment is sold, or (b) December 31, 2026.
- Investors receive a step-up in basis for investments held beyond 5 years (10% step-up) and 7 years (additional 5% step-up), thereby eliminating up to 15% of the original gain from taxation.
- After 10 years, the investor may elect the basis of the investment to equal the fair market value of the investment on the date that it is sold, such that no tax will be due on the appreciation of the investment.
A variety of real estate projects and business ventures may succeed within Qualified Opportunity Zones. Freeborn’s Real Estate Practice Group is well equipped to advise clients on the intricacies of Qualified Opportunity Zone investments, and to ensure compliance and maximize benefits.