Opportunity Zone Investments

by | Jul 11, 2019 | Finances, Investments, Opportunity Zones, Passive Income, Real Estate, Tax Deferral

Do you have gains from a stock or crypto sale for this year? Do you have any other long/short term capital gains you need to offset?

Look into Opportunity Zone Investments and all the benefits they offer including a 7 year deferral on taxes and a 15% step up in cost basis at Year 7 and Zero taxes on your returns within the fund!

I personally invested in an OZ fund early this year to offset a stock sale last year and thereby avoided paying a huge tax bill to save my $$$ to make more $$$ for me. Here’s what a sample analysis looks like on how you can make the most of your money with an OZ investment and allow your money to grow tax deferred.

Returns from an OZ investment contrasted with a traditional investment

If you’re choosing an OZ fund to invest in make sure you do your due diligence on the operators and their planned investments. There are a lot of regulations around OZ and they are constantly evolving and a lot of funds have no idea what they are doing so it can be a potential landmine if you don’t invest with a reliable operator that is adhering to all the IRS guidelines that are ever-changing. When picked well it can be a great way to offset gains and make your money work for you. 

If you’re considering a 1031 exchange it might help to look at OZ investments as well especially if you’re not able to meet the 1031 deadlines with respect to property identification and purchase in this competitive market. The table below illustrates the similarities and differences between the two strategies.

As you can see OZ investments provide tax benefits for deferring taxes from any type of capital gains event including stocks, crypto and more. Also the fact that only the gains need to be invested into the OZ fund frees up the principal to be used towards a regular investment unlike 1031 which requires all proceeds to be reinvested.

With the stock market swings and the potential recession on the horizon investing in select Opportunity zones areas can prove to be a valuable strategy to defer taxes and allow your money to compound, and also benefits from no taxes on the back-end after the 10 year period.

Lookout for our follow-up article on some things to keep in mind while doing your due diligence on investments in OZ funds.