The Tax Benefits of Investing in Opportunity Zones<\/h3>\n
To qualify for the tax incentives, investors must invest the gains from a sale of a prior investment within 180 days. Only the gain or profit must be rolled into an Opportunity Fund, not the original principal. And only the taxable gains rolled over into an Opportunity Fund are eligible to receive the tax incentives.<\/p>\n
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The tax incentives can be realized in one of three ways:<\/strong><\/p>\n Related: <\/em><\/strong>What is a 1031 Exchange in Real Estate? How to Guide & Examples<\/a> <\/em><\/p>\n Now that we have the backstory on Opportunity Zones out of the way, let\u2019s return to the original question: Which Opportunity Zones are the best performing?<\/p>\n For a couple of reasons, the short answer seems to be, \u201cIt is too early to tell.\u201d Until April of this year, when new guidance was released, investment into Opportunity Zones was hindered by regulatory confusion. Many investors felt that a lack of clarity in the tax code could result in an investment that ends up being ineligible for the tax benefit. The new guidance has helped to clarify areas of concern, including the types of businesses eligible for investment.<\/p>\n Another reason it is too early to tell how well Opportunity Zones are performing is that government (IRS) reporting won\u2019t start until 2022. Until then, we\u2019ll need to rely on private sources and anecdotal reports. Although official government data on their performance isn\u2019t available just yet, experts suggest investors look at several factors to assess the potential of an Opportunity Zone investment.<\/p>\n Related: <\/em><\/strong>Opportunity Funds Are Knocking\u2014How Will You Answer?<\/a><\/em><\/p>\n Experts suggest that Opportunity Zones likely to perform above average will be near:<\/strong><\/p>\n Several Opportunity Funds and organizations have produced their top picks for Opportunity Zones.<\/p>\n Fundrise [1], for example, published its list of the top 10 Opportunity Zones in the country with more immediate growth potential:<\/p>\n LOCUS [2], a national coalition of real estate developers and investors who advocate for sustainable, equitable, walkable development in America\u2019s metropolitan areas, also created a ranking of Opportunity Zones. Their ranking is based on the walkability, job and housing density, and proximity to centers of economic activity. The top 10 Opportunity Zones according to LOCUS can be found in:<\/p>\n While we don\u2019t have any hard data about Opportunity Zone performance, it seems the characteristics of a good real estate investment apply here, just as they do with traditional real estate investments. Because of the buzz around tax incentives, Opportunity Zone investments are attracting outsiders who may be less savvy when it comes to picking a good investment. It will be important for these new investors, as well as the experienced, to look at the merits of the investment in and of itself in addition to the potential tax benefits<\/a>. With smart investing choices, this program has the potential to benefit investors and the communities in need.<\/p>\n Sources:<\/strong><\/p>\n [1] https:\/\/fundrise.com\/education\/blog-posts\/the-top-10-opportunity-zones-in-the-united-states<\/a><\/p>\n\n
The Best Performing Opportunity Zones<\/h3>\n
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The Bottom Line<\/h2>\n
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