Savvy real estate investors throughout Boca Raton and Delray Beach are already taking advantage of the savings that a little-known change to the tax code has provided. Dubbed “Opportunity Zones,” these designated sections encourage new development and investments in distressed areas by way of preferential tax treatment.
The best part? Local examples of Opportunity Zones in Delray Beach are currently available for development.
Defining an Opportunity Zone
Opportunity Zones came about as a result of the 2017 Tax Cuts and Jobs Act. The “Investing in Opportunity Act” contained in this legislation allows State and local governments to work together to identify economically-distressed areas ripe for reinvigoration via private capital.
Interested parties can take advantage of the tax benefits offered by investing in both real estate and/or businesses within Qualified Opportunity Zones.
It is important to note that Opportunity Zones differ from a 1031 exchange, and are best utilized as a long-term investment.
Benefits Afforded by Investment in Opportunity Zones
While there are several ways in which to take advantage of investment in Opportunity Zones, perhaps the most enticing involves capital funneled to a Qualified Opportunity Zone, which receives a step-up in basis to the fair market value of the investment, as of the date of sale or exchange. This amount can be attributed to capital gains from holdings of at least 10 years.
In addition, invested capital benefits from tax deferment on gains up until 12/31/2026, and increased step-ups in tax basis can be gleaned based on the length of holdings between 5 and 7 years.
However, before investors can reap these benefits, a Qualified Opportunity Fund (QOF) must be established. This requires the eligible partnership or corporation to self-certify via Form 8996 on their federal tax return.
Furthermore, the deference of taxation is only eligible for the targeted gains if they are invested in a Qualified Opportunity Zone within 180 days, and the purchased asset must be significantly improved upon within the following 30 months.
Of course, consulting with a financial advisor or tax specialist should be the first step prior to purchasing any property within an opportunity Zone.
Community improvement Through Opportunity Zones
Past the financial benefits provided to investors, Opportunity Zones also offer much-needed capital to neglected or disadvantaged areas. While still a new initiative that won’t demonstrate its true effects for many more years, there is no denying the potential for a wide range of positive impacts.
If you are considering investing in a Qualified Opportunity Zone, an experienced local real estate agent is an invaluable asset.
Real Estate Investment Opportunities
For more information about investing in South Florida real estate, and to find out where specific Opportunity Zones in South Florida are located, contact the top real estate agents in Boca Raton from The Pearl Antonacci Group at Lang Realty.
To learn more about Opportunity Zones and their benefits, visit the resources below:
“IRS Provides Much Needed Guidance on Opportunity Zones through Issuance of Proposed Regulations.” Gibson Dunn, 22 Oct. 2018, www.gibsondunn.com/irs-provides-much-needed-guidanceon-opportunity-zones-through-issuance-of-proposed-regulations/.
“Opportunity Zones Frequently Asked Questions.” Internal Revenue Service, www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions.
Brian Pearl, P.A., Realtor®
The Pearl Antonacci Group | Lang Realty