To encourage investment in distressed and low-income communities in the United States, the Opportunity Zones program was created as part of the Tax Cuts and Jobs Act of 2017. Through this program, investors can defer taxes on capital gains for a certain period of time, as long as the gains are reinvested in a Qualified Opportunity Fund. This is a nation-wide program and is available for California investors that qualify.
California investors that would like to participate in the Opportunity Zone program should seek the assistance of an accountant. The Sacramento Opportunity Zone benefit accountants that work with Cook CPA Group are available and eager to help investors in the Opportunity Zone benefits determine whether they qualify, claim benefits, and file all necessary paperwork.
Understanding Opportunity Zone Benefits in Sacramento
The Opportunity Zone program allows investors to defer taxes on capital gains that were made prior to their involvement in the program. They must, however, reinvest their gains into a Qualified Opportunity Fund (also known as a QOF). If the investor maintains their investment for a certain number of years, there are other benefits that can be claimed.
The idea behind the Opportunity Zone program is that investors—who may be venture capital partnerships, investment banks, private equity firms, philanthropic organizations, and other financial entities—can set up vehicles for investment while creating new assets for low-income communities.
If they are participating in the Opportunity Zone program, investors can defer capital gains taxes until the last day of 2026. After that date, investors are able to reduce their tax payment by up to 15%, and then pay nearly zero taxes on the profits that they make from their investment in the Opportunity Fund if they maintain that investment for up to 10 years. Opportunity Zones are areas that, according to the census tract, are low-income communities. State governors and the Chief Executive Officer of United States Territories have nominated Opportunity Zones.
How to Invest in an Opportunity Zone
Investors in the Opportunity Zone program must invest in a QOF in less than 180 days following the sale or exchange of a capital asset. The investment in the QOF must hold at least 90 percent of the investor’s asset in a Qualified Opportunity Zone Property if they wish to remain a QOF.
There are two primary ways in which investors can invest in opportunity zones. The first way to invest in an opportunity zone is to invest in real estate assets that are located within a designated zone. The second way to invest in an opportunity zone is to invest in businesses that are located within a designated zone.
Benefits for Sacramento Investors Participating in the Opportunity Zone Program
The main benefit of participation in the Opportunity Zone program is the deferral of the capital gain tax, which will be deferred until the end of 2026. However, participation in the Opportunity Zone program also allows for tax reduction on a step-up basis. There are two ways that investors can reap this benefit.
One way that investors can reap the benefits of participation in the Opportunity Zone program is to hold the interest in the QOF for five years or more, which will allow them to receive a basis increase in their investment. The increase will be equal to 10 percent of their deferred gain. The other way in which investors can reap the benefits of participation in the Opportunity Zone program is to hold the interest for an extra two years, which will allow them to receive an extra increase of 5 percent on their deferred gain. If the investor keeps their investment for more than 10 years, the capital gains that they accrue on the QOF will receive a full step-up in basis.
Opportunity Zones Available to Sacramento, CA Investors
The Opportunity Zone program is available in all fifty states, including California. In California, there are 57 counties that have Qualified Opportunity Zones. State agencies in California are committed to working with counties with Qualified Opportunity Zones to provide technical assistance to the communities that need investment the most. California’s Qualified Opportunity Zones include the State’s plan for addressing climate change. Many projects that are included in California’s plan for addressing climate change are intended to develop new strategies, reduce emissions, and advance the use of renewable sources of energy.
Sacramento Business Tax Accountants for Claiming Opportunity Zone Benefits
Current or potential investors in the Opportunity Fund program should use the services of an accountant to help them make decisions about their investment. An experienced accountant can help investors discover options that are available to them while offering guidance on the investments that are most beneficial to them. Opportunities for tax savings are available in the Opportunity Zone program and elsewhere and an experienced accountant can help investors identify and claim them. Accountants can also help clients that participate in the Opportunity Zones program by assisting them with structuring and valuation issues that may arise; they may also help clients with modeling and projections of their investments. The accountants that work with Sacramento Opportunity Zone program accountants can help clients find ways to save money on their investments and taxes.
If you have invested in the Opportunity Zone program or are interested in investing in the Opportunity Zone program, get in touch with the accountants from Cook CPA Group soon. The Sacramento Opportunity Zone program accountants that work with Cook CPA Group can help Opportunity Zone program investors with their investment as well as other tax preparation services.