WHAT ARE THE TAX BENEFITS OF INVESTING IN AN OPPORTUNITY ZONE?

The Opportunity Zones program offers three tax benefits for investing in low-income communities through a qualified Opportunity Fund:

1. A temporary deferral of inclusion in taxable income for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.

2. A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.

3. A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.

Figure 1. Investing in an Opportunity Fund vs. a Standard Stock Portfolio Scenario: A Capital Gain of $500,000 is Reinvested in 2019.

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