CLIENT KNOWLEDGE BASE

    Opportunity Zone Investments

    Opportunity Zone investments have gained a lot of attention since their introduction in 2017, as part of the Tax Cuts and Jobs Act. These investments offer a number of benefits, particularly in the areas of capital gains tax strategy and depreciation recapture. 

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      Take It to the Next Level

      Take the benefits of an Opportunity Zone investment to the next level by creating your own fund versus just investing in an existing fund.

      1. Creating your own Fund with capital gains can be extremely beneficial!

      2. You can set up a Fund in the form of a Partnership or LP.

        • Feeder Fund - distribute cash to various OZ projects
        • Direct Fund - directly develop, acquire or invest in 1 OZ project

      3. You can raise outside capital into your fund from others who have Capital Gains they need to mitigate

      EXAMPLE:


      $2M capital gain invested into an OZ fund that invests in real estate projects in an OZ:

      • Gain deferred until April 2027

      • The investment appreciates from $2M to $4M over 10 years.  

        • This gain is 100% tax free

      • Along the way, you achieve $400,000 of Depreciation deductions.  

        • There is NO recapture within an OZ.  This is a hidden benefit many do not understand.

      • Year 3-4: Cash out refi where you receive up to 50% of your capital back, 

        • 100% tax free!





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      Benefits of Opportunity Zone (OZ) Investments

      A few of the top benefits of an Opportunity Zone investments include:


      Tax Deferral 

      One of the most significant benefits of Opportunity Zone investments is the ability to defer capital gains taxes. Investors can reinvest their capital gains into an Opportunity Zone fund and defer paying taxes on those gains until December 31, 2026. 

      This can provide investors with a significant tax advantage and allow them to reinvest their gains in a way that can generate additional returns.

      Long Term Tax Elimination

      Perhaps the most attractive benefit of Opportunity Zone investments is the potential to completely eliminate capital gains taxes on the investment. 

      • If an investor holds their Opportunity Zone investment for at least ten years, they may be able to eliminate all capital gains taxes on that investment. 

      • This can provide investors with a significant financial advantage and help them to maximize their returns vs the baseline scenario.

      • The downside is you MUST hold for 10 years in order to have the tax-free exit from the investment.


      Elimination of Depreciation Recapture

      This is a "hidden gem"! Normally, when a property is sold, the depreciation taken on that property must be recaptured and included in the investor's taxable income.

      With Opportunity Zone investments, there is NO depreciation recapture!
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