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Qualified
Opportunity Zones

WHAT ARE THEY?

The Tax Cuts and Jobs Act of 2017 provides tax incentives for individuals to invest capital gain proceeds into specially created Opportunity Zone Funds that invest in geographic districts designated as Opportunity Zones. 

WHY WERE THEY CREATED?

Opportunity Zones were created to provide tax incentives that encourage investment, job growth and economic expansion in underdeveloped areas.

Gardening

"I really think this has tremendous potential to have a lasting impact in some of our country's most distressed communities."

- Lisa Starczewski, co-chair of the Opportunity Zones Team & Tax Section for law firm Buchanan, Ingersoll & Rooney

WHAT ARE THE TAX ADVANTAGES?

1

GAIN DEFERRAL

Capital gain proceeds invested in an Opportunity Zone Fund are exempt from tax until 12/31/2026. 

2

TAX-REDUCTION

Capital gain proceeds held in an Opportunity Zone Fund for 5 years will receive a 10%reduction of their original tax basis. 

3

TAX-FREE GROWTH

For investments held 10 years in an Opportunity Zone Fund, all fund appreciation is permanently tax free.

ENHANCES RETURNS & PROTECTS AGAINST RISING TAX RATES

Traditional Investment

QOZ Investment

Invested Capital Gains

Less: Capital Gains Tax Due

After-Tax Investment

Year 10 Value 

Less: Assumed Final Cap Gains Rate of 25%

 

Year 10 After-Tax Value

 

Less: Cap Gains Tax on Initial Investment due

12/31/26 

Total Year 10 After-Tax Net Gain 

Year 10 After-Tax Value 

$1,000,000

($200,000)

$800,000

$2,074,994

($318,749)

$1,756,245

-

$756,245

$1,756,245

$1,000,000

-

$1,000,000

$2,593,742

-

$2,593,742

($225,000)

$1,368,742

$2,368,742

Due soley to tax incentives, a $1 Million investment in an Opportunity Zone Fund would net a 1.34x higher post-tax return.

*Assumes investment is held for at least 10 years and a 10% step-up in basis is applied to the original capital gain that was invested.

**Assumes 10-year holding periods and annual appreciation of 10%. 

***The amounts shown are not net of fees and carry in either the traditional investment or the QOZ investment. This is to illustrate the tax benefits of QOZ investments prior to any fee structures. 

WHO ARE OPPORTUNITY ZONES FOR?

Opportunity Zone Funds can be a great choice for investors who have realized or unrealized capital gains including the sale of stock, bonds, real estate, businesses, or even bitcoins, and would like to defer and potentially eliminate some or all of their taxes due. Actively managed OZ funds allow investors to passively benefit from real estate investments so they may focus on other endeavors. Opportunity Zones were designed to spur investment into communities of greatest need and to create lasting positive change.

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Please contact our firm to learn more about NORF 4 Opportunity Zones and the tax impact advantages.