Despite a lackluster investing year in 2022, almost $10 billion in new Qualified Opportunity Zone investments were made last year. This raised the total of new investments since the program began in 2017 to over $100 billion.
High-net-worth investors are clearly aware of the extraordinary benefits of the existing federal OZ incentive, namely, the opportunity to defer capital gains taxes indefinitely or eliminate them entirely, by holding a qualified OZ investment for 10 years.
Capital Gains Tax Deferral
A tax deferment is a powerful and rare incentive, but a tax elimination is even more powerful. Although the array of possible legislative adjustments may make opportunity zone investing even more valuable in the future, it’s impossible to overstate the current value of capital gains tax deferral to current investors.
Don’t Miss Out on a Unique Opportunity
Investors focused on worries of a recession, the short-term step-up benefits expiring in 2022 or the program’s potential expiration in 2026 are taking their eye off the ball — missing out on a unique opportunity to defer or even eliminate capital gains taxes on an appreciated investment.
Because the existing program enjoys broad bipartisan support, it is uniquely positioned to be one of the few federal programs that could be extended or even strengthened despite the current polarized political climate. It is likely, however, that opportunity zone investing will offer meaningful tax benefits for at least the next four years even if those legislative goals are not achieved.
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