Tax incentives for investments in low income communities
The Treasury Department has released rules governing opportunity zones that benefits our industry. It gives investors an additional 30 months (instead of six) to invest their “capital gains” as long as they have “a plan for a qualifying project in a zone”.
Backdrop: The program offers tax incentives for investments in opportunity zones, which is comprised of 9,000 designated low-income communities throughout the United States.
The benefits for investors, according to the WSJ:
- “Investors can roll capital gains from an unrelated investment into a zone and defer those capital-gains taxes until the end of 2026. Those taxes can be reduced by as much as 15%.”
- Taxes on capital gains of investments in such funds can be avoided altogether if the investments are held for at least 10 years.
By the numbers: Treasury Secretary Steven Mnuchin believes that total investment in opportunity zones will near $100 billion in the next few years. The program is projected to save investors $9.4 billion in taxes between 2018 and 2022. Firms like Goldman Sachs, Normandy Real Estate Partners, EJF Capital, and RXR Realty are all raising funds for this specific strategy.