What Questions Should You Be Asking About the Opportunity Zones Program?
Investments grow your wealth. And if you’ve been on the lookout for new investment vehicles, you’ve probably encountered opportunity zones and funds. Here are some of the questions prospective investors commonly ask to help you understand what opportunity zones are and whether they are a smart choice for you, given your budget, time commitment, goals, and portfolio.
What is an Opportunity Zone?
An opportunity zone is an economically distressed property designated by the government. That’s right. You can’t choose an economically distressed community, invest money in the area, and expect that to work for the opportunity zones program. Instead, you need to check with an opportunity zones real estate development company about the areas or communities designated by the government. Choose a community on that approved list. That’s how to invest money in opportunity zones.
What is an Opportunity Fund?
You can’t invest in opportunity zones directly. Instead, you need to use an opportunity fund. That means you either need to be an organization or company. You can also build one by partnering with other investors wanting to invest in opportunity zones and take advantage of the huge tax perks.
Will There Be Any Risk?
Like any investment, putting money in opportunity zones come with risks. If the investment efforts fail to bring the community back to life, that will mean your investment has failed. Of course, even if that happens, you still get the tax perks. However, if you want to make the most out of your investment, it pays to evaluate the properties on the list. With more information about the communities, you have a much better chance of identifying which areas will turn out successful. Consulting a real estate investment group is also wise. They can point you in the right direction and help you avoid costly investment mistakes. With more information about the opportunity zones, you can reduce the level of investment risk.
How Much Time Do I Have to Defer the Gain?
You have 180 days from the date of the exchange or sale of the property to put the proceeds or capital gain money into a Qualified Opportunity Fund. If you miss the 180-day window, you won’t be eligible for the program. As for the 180-day investment period, you can start on the last day of the entity of the taxable year. If that doesn’t work for you, consider the same date that the entity’s 180 day starts, or you can work with the entity’s deadline for its tax return. Check the dates thoroughly. If you confuse the dates, that could mean wasting an opportunity.
Can I Still Invest in Qualified Opportunity Zones?
The deadline for the step-up in basis provisions has long since ended. However, you can still invest in Qualified Opportunity Zones. If you do, you can still enjoy exceptional tax gains deferral. You have until 2026 to defer the gain or a year before that if you sell the investment. You can also avoid any tax on the appreciation if the investment is held for ten years.
