July 12, 2019
Low-Income Housing “Opportunity Zones” For Investors
The Tax Cuts and Jobs Act of 2017 contained a considerable number of changes to monetary effects of real estate holdings. Among the more beneficial of these changes for investors was the passing of a new classification of real estate area known as “Opportunity Zones,” also referred to colloquially as “Opp-zones,” “OZones,” or “OZos.” States were empowered to create and publish maps of census tracts that fall under the “Opportunity Zone” classification, which is up to 25 percent of existing low-income tracts, and most have done so. The Internal Revenue Service was charged with choosing which tracts to classify as Opportunity Zones, for which it generally utilized statistics, and also with codifying regulations on investment zones that are aimed at developing opportunities for these lower-income communities. Among the goals of this effort are the return of businesses and jobs to these areas, which have suffered from underdevelopment and have been subject to blight for years. The IRS published these regulations in a 70+ page document back in October of 2018.
The Opportunity Zone classification is planned to expire on the last day of December 2026. Among the reasons to invest in such a zone well before then are: tax deferments on investments there; tax deferments on income reinvested there; and forgiveness of taxes on improvements made to the value of a building found in such a zone at sale time—so long as it is held for ten years.
These incentives are designed to convince Americans possessing a share of the extant $6.1 trillion worth of untapped capital gains in this country to put some of that money to work to aid these lower-income communities via investment. This may be achieved via a Qualified Opportunity Zone Fund, which offer further benefits as well (and do not require that one exit from the fund until 2047).
Here at Topouzis & Associates, P.C., we do extensive title search work and perform curative services on every form of real property, including investment properties, so that a buyer knows for sure that they are getting into a parcel with clear title. Contact us if you have any questions or if you would like our considerable experience in dealing with the particularities of the real estate system.