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Capital Gains Tax Incentives

Capital Gains Tax Incentives

Part one of three in our Qualified Opportunity Zone series

Nobody loves talking taxes, but everyone loves to reduce their taxes. Do you owe capital gains taxes and wonder if you can defer or reduce your tax? Turns out, yes you can!

In late 2017, the Tax Cuts and Jobs Act made drastic changes for taxpayers, especially for capital gains. Tucked inside this new legislation is the Investing in Opportunity Act, a new set of tax laws that lets you slash or delay paying capital gains tax when you invest in what’s called a Qualified Opportunity Zone (QOZ).

We’ll discuss what and where you can find QOZs, how you can receive the tax benefits, and the best way to invest in our three-part blog series. Ready to dive in? Let’s go.

What are Qualified Opportunity Zones?

First things first: Qualified Opportunity Zones are tracts of land the government has designated as economically disadvantaged. Nominated by each state’s governor, these low-income communities have at least a 20% poverty rate or a median family income 80% or less compared to the surrounding area. States with higher populations, like New York or California, have more QOZs, while states with areas of sparse population like Wyoming have fewer.

Previously, government funding revitalized these poor neighborhoods at the taxpayer’s expense. But the new Investing in Opportunity Act established Opportunity Funds to help. Now investors can place their money into a qualified Opportunity Fund and receive hefty capital gains tax incentives (more on that in part two). It’s really a win-win. The private funds help restore ailing communities by bringing in new business, creating jobs, and stimulating the local economy, and investors can reap the tax benefits. 

Where are Qualified Opportunity Zones located?

More than 8,700 tracts of land were officially designated as QOZs nationwide—that’s 12% of all land tracts in the United States. Located throughout the country, QOZs exist in every state and U.S. possession including American Samoa, Guam, the Virgin Islands, the Mariana Islands, and Puerto Rico. In fact, all of Puerto Rico has been flagged as a QOZ.

With so many communities deemed QOZs, it’s quite possible that you work or live near one. Right here in Tippecanoe County, Indiana, much of West Lafayette lies within a QOZ. You can learn more about Zones near you with this helpful interactive map.

The tax implications from the 2017 Tax Cuts and Jobs Acts are still taking hold, making Qualified Opportunity Zones mostly unheard of until recently. In part two of our series, we’ll dive into the specific (and sometimes quite lucrative) capital gains tax benefits you can receive by investing in this way. Stay tuned!

Reach out to Kyle Mandeville at 765-742-9068 to start a conversation today.

The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.

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The sidewalks and curbs around the Columbia Center will be under construction through June 2023.