Opportunity Zones

 
 

What are Opportunity Zones?

Opportunity Zones are a federal initiative designed to promote private investment in under-developed census tracts in all 50 states. Investment incentives include deferral of capital gains until 2026, opportunities for a step-up in basis on deferred gains, and tax-free growth for Opportunity Zone investments held for ten years or longer. These incentives create compelling upside for investments that meet Opportunity Zone criteria.

Capital Gain Deferral Until 2026

Investors receive an immediate deferral on recent capital gains invested in Opportunity Zones. Any capital gain is eligible for deferral — including both short- and long-term gains from sale of stock, property, or other investments. Gains must be re-invested in an Opportunity Zone fund within 180 days of recognition to be eligible for deferral.

Step-Up In Basis

Investors receive up to a 15% step-up in basis* on the deferred capital gains invested in a Qualified Opportunity Fund.

  • A 10% step-up* in basis after 5 years of investment in an Opportunity Zone fund.

  • Another 5% step-up* in basis after 7 years of investment in an Opportunity Zone fund. 

    *10% step-up in basis was available for QOF investment made by December 31, 2021. 
    Additional 5% step-up was available for QOF investment made by December 31, 2019.

10+ Years of Tax-Free Growth

Investors who hold their Opportunity Zone investments for at least 10 years can sell tax-free.  IRS rules allow Opportunity Zone investors to elect a step-up in basis to the fair-market value of the investment at the time of a sale, resulting in the elimination of depreciation recapture and tax-free investment growth for the entire investment period.