Opportunity zones were created in 2017 when the new Tax Cuts and Job Act was implemented. They were designed to elicit economic development and to create jobs in less developed communities across the United States. 

The zones were designed with inherent tax benefits for investors who may decide to invest capital in them. They are designed in a way that brings a lot of advantages to investors and buyers, which don't include tax benefits only. Let's take a look at all the advantages you can get by buying in opportunity zones.

The Tax Benefits

First and foremost, we have to discuss the tax benefits. Everyone knows that opportunity zones have them, but not everyone knows which ones.

If you decide to invest in a Qualified Opportunity Fund, you get significant federal tax benefits over time:

• You get to defer taxes that would otherwise go on capital gains. However, you can't defer a gain from a sale or exchange with a related party. Also, deferral extends until the end of 2026.

• You can exclude 10% of your deferred gains from federal capital gains tax if you hold an investment in an opportunity zone for more than five years. If you keep it for more than seven years, then it's 15%.

• You don't need to pay any capital gains tax when you sell or exchange property in an opportunity zone if you hold it for more than ten years.

Tax benefits are naturally the main advantage of buying in opportunity zones, but they are not the only ones. 

Other Advantages

Those who decide to invest in opportunity zones get another significant benefit that might be the biggest advantage of all – access to capital.

It is the general belief that many can obtain cheaper capital on projects located in opportunity zones. But besides that, opportunity zones are probably the best source of long-term equity at the moment. 

The model of opportunity zones gives investors access to cash in specific areas, and in many of those, it makes more sense to pursue the investment instead of a 1031 exchange, like many believe they should do. 

Another thing that might not be considered an advantage to some is the fact that investors need to hurry with their investments in opportunity zones. Because the deferrals last until the end of 2026, as we previously mentioned, you need to invest by the end of 2019 to obtain the most benefits over time. 

Key Takeaways

As you can see, investing and buying property in opportunity zones can be quite advantageous for you. You get many advantages that are not awarded to other investors in other parts of the country. What's more, plenty of the areas in opportunity zones are incredibly worthwhile for investment, as many professionals can tell you. 

Hire an agent who can help locate the right areas to invest in and the best properties to buy. For more information, you can reach us at info@cbicommercial.com