When Do Opportunity Zones Expire?
As an investor, you’ve probably heard about opportunity zones. If you haven’t, you’re missing out on an excellent opportunity to take advantage of tremendous tax perks. However, before you go ahead and put your money in an opportunity zone, make sure you know the conditions. Some investment deadlines have already expired. Here’s what you need to know before you invest any of your money.
What is the Qualified Opportunity Zone?
The Qualified Opportunity Zone is an incentive program. It was passed in 2017 under the Tax Cuts and Jobs Act or TCJA. The program offered incentives to taxpayers who would invest in economically distressed communities. The program came with temporary and permanent tax breaks so substantial that any investor would jump at the chance that the program offered. That’s why many invested in opportunity zones.
What’s Happened to the Program?
It’s already 2022. Sadly, some of the benefits of the program have already expired. That doesn’t mean that new investors won’t get anything, though. It just means you’ll need to review the terms and conditions to make sure you know what you’re getting into. Some of the advantages or tax breaks you might be expecting might have already expired. That way, you’ll know what your options entail before you pick any.
What Deadlines Have Already Expired?
When the Qualified Opportunity Zone was created, one of the conditions was that taxpayers could receive a 15 percent discount on their original investment. That will only be effective, though, if the taxpayer holds the investment for at least seven years. Also, taxpayers who invest in a qualified opportunity fund in 2020 or 2021 and then hold their investment for about five years can see a 15 percent step-up on their gain. Both conditions have now expired.
What Can Investors Do Now?
If you still want to invest in a qualified opportunity fund, you can follow these steps:
• Invest in a QOF before December 31, 2021. If you managed to do this, good for you. You can now reinvest your capital gains into a QOF. You’ll receive the 10 percent step-up in the incentive. If you missed your chance, don’t worry. There are other deadlines open to you.
• Invest in a QOF before December 31, 2026. That’s a few years from now. You can definitely prepare for that deadline. If you didn’t have enough for investment last year, then do your best so that by the time that deadline rolls around, you already have enough for an investment. Make sure you get that investment before the 2026 deadline.
• Create a Qualified Opportunity Fund. Another way to defer gains is to use the Qualified Opportunity Zone program. You can use it to draw in more capital for your building projects. Construction companies are taking advantage of the incentives offered by qualified opportunity zones by creating qualified opportunity funds.
What to Know About QOFs?
If you run a construction company, you can use QOFs to your benefit. You can get investment dollars from investors. Make sure you get help from pros on how to operate a trade or business in a location tagged as a qualified opportunity zone.
