What Are The Tax Benefits?

The unique feature of Opportunity Funds is that capital gains from virtually any asset class can be invested with several tax benefits.

Realized Capital Gains Are Invested Into Opportunity Funds On A Tax Deferred Basis:

  • You have 180 days to take realized capital gains and direct them to an Opportunity Fund.
  • You will not have to pay taxes on these capital gains until December 2026 and with a step up in basis (see below).

Reduced Taxes On Your Original Capital Gains: 

  • After five years of investment: A 10% step up in basis on the deferred capital gains.
  • After seven years of investment: An additional 5% step up in basis on the deferred capital gains.
    • You would owe taxes on 85% of your original capital gains while it has been invested on a tax deferred basis for seven years.  
    • This tax bill is paid by December 2026.
    • Alternatively, you could pay taxes on the fair market value of your Opportunity Fund investment instead of on your original capital gains, whichever is lower.

Tax Free Treatment Of Your Opportunity Fund Investment After Ten Years:

  • After ten years of investment: The basis in your investment in an Opportunity Fund becomes eligible to be reset to fair market value after ten years.
  • In other words - if structured properly, gains from your investment in an Opportunity Zone Fund may be tax free.

 

Disclaimer: Investors are encouraged to consult their own advisors, including tax and legal, to fully understand the benefits and risks of Opportunity Zone investing.

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