Investors are eyeing the tax advantages of investing in Target Opportunity Zones, a new vehicle established under the Tax Cuts and Jobs Act of 2017. The law allows taxpayers to defer capital gains taxes on profits from the sale of any property until 2026 and reduce that tax payment by up to 15%, among other provisions.
Opportunity Zones have the potential to open up a sizable new sector within the real estate investment market. The program encourages investment in economically-distressed communities as designated by state governors and certified by the U.S. Department of the Treasury. The U.S. Treasury has certified 8,700 Opportunity Zones. View map and download list of zones here.
This new instrument, on the surface, may seem similar to Empowerment Zones and Renewal Communities, which were past congressional attempts to boost economic growth in depressed areas. Target Opportunity Zones, however, promise greater advantages for investors.
Guidelines are still emerging for how Opportunity Zones can work; read more in last week’s WSJ article. We’re excited about the program’s potential and are monitoring developments to evaluate opportunities for our clients.