Opportunity Zones – Capitalizing on Federal Tax Incentives
The tax reform bill passed by the federal government has given those involved with real estate a break. Its passage is having a positive impact on taxpayers around Columbus.
The reform bill has created a new “Opportunity Zone” program, which allows a taxpayer to defer income tax on capital gains. If you sell a business or eligible property, you may be able to reinvest the proceeds from that sale into the Opportunity Fund. The Fund will allow you to reinvest your proceeds into one or more businesses or properties that are within a qualified Opportunity Zone. These designations are given to low-income areas specifically targeted by the state and federal government.
Columbus neighborhoods located from the Far East Side to Hilltop are designated to be Opportunity Zones by the U.S. Treasury. Each of the 44 tracts of land that met the designation requirements are eligible for Opportunity Funds that can help provide more resources to those interested in neighborhood economic development.
“I am committed to making sure every person in every neighborhood has the opportunity to succeed,” said Columbus Mayor Andrew Ginther in a city press release. “The areas we suggested are already being targeted for public and private development and revitalization. We strongly believe that designating these tracts as Opportunity Zones can play a pivotal role in ramping up the work already taking place in these neighborhoods, both in scope and speed.”
Benefits of Opportunity Zones
A taxpayer can use Opportunity Zone reinvestment opportunities to their advantage. Here are a few benefits of allocating your funds into these areas:
- Temporary Deferral — A taxpayer can defer any amount of tax owed on capital gains from an Opportunity Zone investment. The liability will be eligible for deferment until December 31, 2026 unless the investor sells the property sooner.
- Gain Reduction through Basis Adjustment — The basis for capital gains of an investment made into an Opportunity Zone will increase by ten percent if the investor holds the property for at least five years. The basis will increase by an additional five percent if the investment is held onto for at least seven years. In summation, an investor can raise their capital gain basis by 15 percent simply by holding onto an Opportunity Zone investment for at least seven years.
- Opportunity Zone Investments Can Be Excluded for Capital Gains — Even more beneficial than just a gain reduction, Opportunity Zone investments give investors the chance to have all tax removed from capital gains. If an investor holds onto a property in an Opportunity Zone for at least ten years, then the basis of the investment will be its fair market value on the date in which it will be disposed. The investor will not be taxed on the gain realized from the disposition of an Opportunity Zone property after ten years.
Opportunity Zones have been designated throughout the city of Columbus and the state of Ohio. For more information about the Zones, consult the state’s interactive map.
To learn more about potential real estate investment in an Opportunity Zone, consult Brown Multifamily Advisors. We have more than 18 years of experience in the Central Ohio commercial real estate industry and the unique ability to create a national market for local multifamily owners. Focusing exclusively on the sale of multifamily investments, BMA has developed an extensive and qualified database of local and national principals. When combined with thorough market research and a highly professional approach to the disposition process of multifamily properties within Central Ohio, BMA increases buyer participation, resulting in more offers and properties being sold at maximum values.
BMA helps buyers forge investment opportunities and sell a diverse range of multifamily properties. BMA has compiled an impressive track record of success in evaluating, marketing and closing more than 150 properties that include student housing and conventional and affordable multifamily properties in Ohio.
The foundation of BMA’s success is built on integrity, an unparalleled work ethic and a desire to establish and maintain long term relationships. Headquartered in Central Ohio, Brown Multifamily Advisors has a large inventory of properties available throughout central Ohio.