New Tax Breaks in Opportunity Zones
by Matthew Roberts, Certified General Real-Estate Appraiser
Congress recently passed the Tax Cuts and Jobs Act in late 2017. Part of the reform included the creation of “Qualified Opportunity Zones”. The program is meant to encourage private investment in lower-income areas. Their view is that these areas have struggled the most since the last recession in 2008, and the plan is to bring in new investment and commerce. There are almost 10,000 of these zones nationwide that have been selected by the state governors and approved by the US Treasury. There are some in all 50 states, and many within Missouri, Illinois, and Iowa.
So what is an Opportunity Zone? It’s basically an investment vehicle for investing in business or property located in one of the zones. The incentive to do so comes in the form of tax advantages. The first advantage is that any portion of a gain realized in the sale of an investment that is reinvested into one of these Opportunity Zones is not immediately taxed as a gain but is deferred until as late as 2026. Second, if the new investment is held long term, 5-7 years, 15% of the original gain can be permanently excluded from taxation. And third, if a property is held by an investor in the Opportunity Zone for at least 10 years, any gain on the sale of the investment can be exempt from federal tax.
See the announcement by the U.S. Treasury here:
See the list of Opportunity Zones here:
Because some of these zones are within our appraisal coverage area, we will be keeping a close eye on how these zones are rolled out and how local real estate development responds. And so should you, since there may be new opportunities for many professions!