The new tax law has created a method of tax savings by providing tax benefits to taxpayers who reinvest capital gains into vehicles called Qualified Opportunity Funds. These funds hold at least 90% of their assets in Qualified Opportunity Zone Property, which is property in low-income communities. If taxpayers take advantage of this opportunity by investing in these funds by 2021 and holding them for at least five years, the law allows them to increase their basis in the initial investment, reducing the amount of the gain that is taxed. A 10% – 15% increase in basis can be recognized depending on the date of the initial investment.
Further, taxpayers can avoid any tax liability on any increases in the interest of the investment if the investment is held in the fund for over ten years. At the ten year mark, a taxpayer’s basis in the interest becomes the fair market value of the fund and any appreciation beyond the initial investment to that point is not taxed. Contact your tax professional for more details.