OZs were created to boost economic activity in selected census tracts across the country. According to Brookings Institute, there are 8700+ US Census Tracts designated as Opportunity Zones, of which 19% are in already gentrifying areas.
The tax reform bill added Opportunity Funds as a new way to incentivize investment in specific communities called Opportunity Zones (OZs). An OZ Fund is an investment vehicle that invests at least 90% of its holdings in real estate within a qualified OZ.
Opportunity Funds enable investors to defer federal taxes on recent capital gains until Dec 31, 2026, have that payment reduced by up to 15%, and pay as little as zero taxes on profits from an Opportunity Fund if that investment is held for 10 years.
After selling an asset such as stocks or bonds, real estate, or interest in a partnership, an investor usually triggers a capital gain. These investors can receive special tax benefits by rolling their gain into an Opportunity Fund. The three primary reasons to roll your capital gain into an Opportunity Fund are:
of your capital gains until Dec 31, 2026
you owe by up to 15% after 7 years
on gains earned from an Opportunity Fund
“$6.1 trillion is the total estimated unrealized capital gains that both American households ($3.8 trillion) and American corporations ($2.3 trillion) hold. Out of which, most experts believe OZ Funds will redirect as much as $100 Billion dollars into these regions.”