Roseville Accountant to Help with Opportunity Zone Benefits
Investors participating in the Opportunity Zone Program can benefit from having an CPA manage their benefits. Learn more with Cook CPA Group.
The Opportunity Zones program was created as part of the Tax Cuts and Jobs Act of 2017 as a way to encourage investment in low-income communities throughout the United States. This program allows investors to defer taxes on capital gains for some time if they reinvest the gains in a Qualified Opportunity Fund. Currently, there are upwards of 8,700 Qualified Opportunity Zones in every state in the United States, including California.
If you are a California investor interested in participating in the Opportunity Zone program or if you are already participating and you would like help managing the benefits you receive through the program, get in touch with an experienced accountant as soon as possible. An accountant can help investors determine whether they qualify for participation in the program, claim benefits, and file the necessary paperwork. Call the Roseville Opportunity Zone benefits accountants from Cook CPA Group today at (916) 432-2218.
Understanding Opportunity Zone Benefits
The Opportunity Zone Program allows investors to make a deferment on their taxes on capital gains made before they became involved in the program. Their gains must be reinvested into a Qualified Opportunity Fund, also known as a QOF. A Qualified Opportunity Fund is any vehicle for investment that files income tax returns as a corporation or partnership to invest in Opportunity Zone assets. Eligible investment vehicles can become Qualified Opportunity Funds by self-certifying on IRS Form 8996 when they file their federal income tax returns.
The investor can claim other benefits if they maintain their investment for a certain number for years. The purpose of the Opportunity Zone Program is for investors (venture capital partnerships, investment banks, philanthropic organizations, private equity firms, and other financial entities) to set up avenues for investment while creating assets for low-income communities.
Investors who participate in the Opportunity Zone Program can defer capital gains taxes until the final day of 2026. Following that date, investors can reduce their tax payment by up to 15%, after which they can pay nearly zero taxes on their profits made from their Opportunity Fund investment, as long as they maintain the investment for up to 10 years. Investments must be made in Opportunity Zones, which are low-income communities, as indicated by the census tract. Opportunity Zones were selected after being nominated by state governors, and are then certified by the Secretary of the U.S. Treasury. As the program currently exists, no new Opportunity Zones can be added or created, nor can their boundaries be adjusted.
Investing in an Opportunity Zone
Opportunity Zone Program investors must invest in a Qualified Opportunity Fund within 180 days of the exchange or sale of a capital asset. The Quality Opportunity Fund investment must hold 90 percent or more of the investor’s assets in a Qualified Opportunity Zone Property to be able to remain a Qualified Opportunity Fund.
Investors can invest in opportunity zones in one of two ways. One way is to invest in real estate assets located within the designated Opportunity Zone. Another way to invest in an opportunity zone is to invest in businesses located within the designated Opportunity Zone.
Benefits of Investing in an Opportunity Zone
Deferral of the capital gain tax is the main benefit of the Opportunity Zone program. Participation in the program can also allow for a tax reduction on a step-up basis, which can benefit investors in two ways.
One way that investors can benefit from participation in the Opportunity Zone program is to hold interest in the Qualified Opportunity Fund for at least five years. This will allow the investor to receive a basis increase on their investment, which will be equal to 10 percent of their deferred gain. Another way that investors can benefit from participation in the Opportunity Zone program is to hold the interest for an additional two years, which allows them to receive an extra 5 percent increase on the deferred gains.
Opportunity Zones in California
All fifty states, including California, have Qualified Opportunity Zones. California has 879 designated Opportunity Zones in 57 counties. More than 3,000,000 Californians live within these Opportunity Zones. State agencies in California work with counties that have Qualified Opportunity Zones to provide them with technical assistance for communities with the most need for investment. The Qualified Opportunity Zones in California are included in California’s plan to address climate change, meaning that investments should help develop new strategies, advance the use of renewable energy sources, and reduce carbon emissions.
How an Accountant Can Help You with Opportunity Zone Benefits
Investors in the Opportunity Fund program (or investors who are interested in participating in the program) should use the services of an experienced accountant to ensure they’re making sound investment decisions. A qualified accountant can help investors by finding investment options while providing guidance on which ones are most beneficial to them in the long-term. An accountant can also help investors by identifying opportunities for tax savings, claiming tax savings, and filing necessary tax returns.
Roseville Business Tax Accountants for Claiming Opportunity Zone Benefits
The accountants from Cook CPA Group are available to help people who are participating in the Opportunity Zone program or who are interested in participating.