Qualified Opportunity Zones

Qualified Opportunity Zones


This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.

Full Transcript

Qualified Opportunity Zones, or QOZs, are designated census tracts which are eligible to receive certain tax incentives. Qualified Opportunity Funds, or QOFs, are investment vehicles which make qualified investments in QOZs for the purpose of spurring economic activity in these areas.

Capital gains from the sale of any asset are eligible for QOF tax benefits, which include:

  • Deferment of payment of capital gains taxes through 2026;
  • Reduction in the taxable amount of gains; and
  • Elimination of future capital gains associated with the investment. Essentially, the gains on the gains may be completely tax free.

While QOFs may provide significant tax advantages, prospective investors should consider the following:

  • QOFs are illiquid. In order to maximum tax benefits, investment must be held for a minimum of 10 years.
  • QOF real estate programs typically involve ground-up development, which is on the riskier end of the real estate investment spectrum.
  • QOF investments may go several years without income distributions while projects are being constructed.

Investment Property Wealth Management® is predicated on making sound decisions impacting financial and personal objectives. For the right investors, the QOZ program may offer significant appreciation potential and tax benefits while positively impacting communities in the process.