When looking to diversify your portfolio, Opportunity Zone Programs are a great option because of the many economic advantages and tax breaks for long-term investments. The general idea behind the program is to promote long-term development and investment in areas of need, through tax breaks to stimulate investment in an Opportunity Zone Property and location.
Opportunity Zones were created with the 2017 Tax Cuts and Jobs Act to stimulate development and investment for economically-distressed communities. For investors who have Capital Gains from a property sale, and subject to being within 180 days, you can potentially reinvest your capital gains in a Qualified Opportunity Fund.
So far in the US, there are 8,760 designated Qualified Opportunity Zones. To find a good Opportunity Zone to invest in, you can talk to real estate developers, commercial real estate brokers, or economic development agencies. Brevard County, Florida, offers many long-term investment opportunities in Cocoa, Melbourne, Palm Bay, and Titusville.
There are several benefits to investing in an Opportunity Zone. One is the temporary deferral of taxes on previously earned capital gains. If you invest your current capital gains into a QOF then the existing gains are not taxed until a later date, or until you sell your Opportunity Zone investment.
The biggest potential economic benefit incentivizes long-term investment in a QOF. Subject to program requirements, in general, if you have invested in a QOF for at least 5 years, 10% of your deferred gains are potentially excluded from taxation, and at 7 years the exclusion potentially becomes 15%. Depending on when you purchased an OZ Property, and subject to program requirements, if you held an investment for at least 10 years you potentially could have a greater benefit.
The above is a generalization of OZP. Prior to commencing any transaction in an Opportunity Zone, the transaction should be reviewed by your CPA, accountant, or tax professional. There are a few different programs throughout Brevard County that you may want to consider as you develop your investment portfolio. If this is something you’re interested in pursuing, contact Ullian Realty. Our brokers will help you identify the best investment property for your long-term goals, with assistance from your tax professionals.
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