If you have heard of qualified opportunity zones you have likely heard a bit of talk about the tax benefits of investing in them. Sensiba San Filippo had a post on the topic, giving a thorough explanation of what opportunity zones are and their different uses of them. But here is the interesting part for those who want the tax breaks on their investments.
The government wants to incentivize investors to invest in projects that can be helpful to a wide array of people. So the gist of opportunity zones is you invest in them for a number of years and depending on how long you keep your money in them, you get increasingly more beneficial tax breaks.
As far as how long it takes to start seeing any benefit, you need to leave the money untouched for at least five years. Doing that will make 10% of any gains you make from the investment untouched by taxes. Sticking with the investment for seven years adds another 5% on top of that. However, being patient just a few more years will see the real benefit that everyone wants.
If you leave the money untouched for over ten years, 100% of the gains on your investment will be untouched by taxes. Obviously, that requires quite a bit of patience and long-term planning, but if you can accept that, you receive quite the appealing reward at the end of the stint.
Fred Hubler, Chief Wealth Strategist for Phoenixville-based Creative Capital Wealth Management Group, a wealth management practice that services families in 28 states and specializes in retainer-based planning and alternative investment strategies, uses opportunity zone funds for his clients.
According to Hubler, “opportunity zone investment funds should be sponsored by a large institution. Large institutions have the necessary resources to get the type of real estate and make the improvements that matter.”
“We also have used funds, Hubler continues, “that allows a tax-free refi out so not all of your capital gains are stuck for the 10 years. In the 16-plus years, we’ve been using alternatives, I have never seen the number and quality as I do with today’s current choices, it’s a good time to be an accredited investor”
Like with all investments, there is a risk. There is no guarantee you will see gains on the investment at all. However, for those who do their research on a project before investing, qualified opportunity zones have proven quite the popular way to maximize the return on what you put into an investment.
To learn more about how opportunity zones work and how you can start investing in them, read the post from Sensiba San Filippo here.
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