As with any new investing structure, the latest initiative called Opportunity Zones might have you wondering if it’s worth including in your investing portfolio.
Maybe you’ve heard how Opportunity Zones offer exciting tax incentives to help boost economic growth in underdeveloped communities. The incentives involve a temporary tax deferral (until 2026 at the latest) on Original Capital Gain that you invest in a Qualified Opportunity Fund (QOF). Here’s how this plays out:
The incentives have attracted major interest among investors. Yet, there are a few questions as to how some details of the program will work. If you’re still unsure whether or not you want to get involved, let’s break down the benefits and challenges.
Beyond tax incentives, the Opportunity Zones (OZs) initiative was designed to provide several key characteristics to attract investors and benefit underdeveloped communities:
There are a few challenges everyone involved is still trying to figure out, which bring up questions that might make investors hesitant to participate. For example, there is question as to how the government will ensure that the overall intention of the initiative to build community in underdeveloped areas and the balancing out of city zip codes will be accomplished. The Opportunity Zones Coalition and the Treasury are still ironing out the kinks. Here are more of the challenges that need to be further defined:
A federal tax incentive like this is huge for investors and can pose a large impact on our communities. Of course, with every new and complex initiative, there are always remaining details to sort out. Even so, we are certain the benefits of this great incentive program prove to offer exciting possibilities to investors and will achieve its goal to promote the underdeveloped communities inside Opportunity Zones—which will benefit everyone in the end.
If the Opportunity Zone benefits outweigh the challenges for you, we’d be excited to offer a free consultation to help you decide if you’d like to expand your portfolio. We can help you scout OZs and find your best-fit Qualified Opportunity Zone Fund. Connect with our investing professionals today!