Tax Advantages of Opportunity Zones and Qualified Opportunity Funds

A real estate professional with more than 15 years of experience, Barclay Grayson manages a diverse portfolio of multi-family, commercial, and retail properties as senior vice president of BPM Real Estate Group in Portland, Oregon. Barclay Grayson maintains an interest in professional topics such as Opportunity Zones, of which downtown Portland is one.

Created as part of the 2017 Tax Cuts and Jobs Act, Opportunity Zones across the United States aim to increase investments in economically disadvantaged communities. Specifically, Opportunity Zones entice new businesses to an area by providing capital-gains tax incentives for investing in property there. Investors can get involved through a Qualified Opportunity Fund for a particular zone.

An investor who has realized a capital gain by selling an asset such as real estate can receive special tax benefits when they reinvest the gain in a Qualified Opportunity Fund within 180 days.

Investors can defer tax on the eligible gains on the value of what they invest, with the benefit depending on how long they hold the investment. After five years, 10 percent of their deferred gain can be excluded from tax, with an additional 5 percent exclusion occurring after seven years. After 10 years, investors can permanently defer tax on their investment when it is sold or exchanged.