Opportunity zones investing

[Andre Pennix]

How do the gains made by opportunity funds get taxed? Do they also have major incentives tied to the gains you claim for having invested in them?

[Matthew Ryan]

@Andre Pennix - The gains invested in an Opportunity Zone get taxed like this:

$100k Gain in 2019 tax year defers full federal tax on the gain until 2026. In 2026, you reducce your tax burden on the $100k by 15%. So only 85% of the $100k is now taxable ($85k). If you invest after this tax year and up to 2021, you pay tax on $90k. Any cash on cash returned during the investment period is still subject to tax. If you keep the investment for ten years, so you go to sell in 2029, and say that investment is now worth $250k ($150k profit plus $100k initial investment), you pay zero tax on the $150k gain. You wouldn't pay any additional tax on the $100k initial investment because you already paid that in 2026. 

Make sense? Now, you must meet the substantial improvement clause and all IRS guidelines for an Opportunity fund. None of which should be done with out consulting an attorney. Also, this is not tax or investment advice, not meant to be construed as tax or investment advice and you are responsible for doing your own research regarding yours or anyone elses investments. Best of luck.