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How to Defer, Reduce and Eliminate Capital Gains Tax

2018 was a big year for tech initial public offerings but with some major IPOs on the horizon, 2019 is already showing signs that it could be even bigger. New IPOS mean a lot of incredible wealth creation and the potential for billions of dollars to hit the market, but while IPOs, mergers, and acquisitions are exciting, paying Capital Gains taxes on the profit can put a damper on things. But what if this is just another opportunity? What if you could put off paying for seven years and when you did pay, you paid less? And what if money you made off that money in the meantime was free and clear of any Capital Gains tax if you waited just three more years? And what if you could make a real difference in the world at the same time? That’s exactly why Opportunity Zones have tech CEOs across the US seeing dollar signs. The lure is real.

Opportunity Zones Capital Gains

Opportunity Zone Funds are a new class in real estate opportunities that let you defer, reduce, and even eliminate your Capital Gains taxes. Created as a result of a bipartisan piece of legislation included in the 2017 Tax Cuts and Jobs Act, which was crafted by Silicon Valley legend Sean Parker. Opportunity Zones offer specific federal tax incentives designed to promote long-term investment in designated economically-distressed neighborhoods across the country. Basically, it’s a new way to connect private capital with low-income communities across America in a way that will benefit both parties. So, what does it mean for you specifically? Well, when you think of it in terms of a typical portfolio, it means you can potentially double your after-tax profits. How? The triple threat:

Defer-Icon1. NOW - Defer Capital Gains Tax

It’s simple. You sell a property or investment at a profit then reinvest that money into an Opportunity Zone Fund within 180 days. From there, your Capital Gains don’t need to be recognized when the investment is sold or exchanged or until December 31, 2026.

 

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2. Seven years from now - Reduce Capital Gains Tax

After holding your investment in the Opportunity Zone Fund for seven years, the Capital Gains tax on the original Capital Gains is reduced by 15%. In other words, just 85% of the original gain will be included in taxable income.

 

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3. Ten years from now - Eliminate Capital Gains

If you hold your investment in the Opportunity Fund for ten years, you don’t pay taxes on gains earned from the Fund. Ever. It sounds too good to be true, but it is. If you hold your investment for ten or more years, you pay ZERO Capital Gains tax on the appreciation of the Fund assets.

And that’s not all. Opportunity Zones also offer you the potential to be a part of making a significant social impact in communities. Because the location of Opportunity Zones has already been defined, investors have a better sense of where and how their money is being used and the outcome it will generate, diversifying and enhancing your portfolio in meaningful ways. So not only does investing offer a great way to deal with Capital Gains, it also makes you look good while benefiting the areas around you. Which is something people will definitely be talking about.

According to Recode.net you can “Expect big boasts from Silicon Valley titans in 2019 about how their money is changing the world — and perhaps even some gumptious attempts to cast Opportunity Zone investments as “charity” — with little to no mention that this is simply money chasing more money.” It may not be charity per se, and it is a great way to make money, but that doesn’t change the fact it benefits the community. Maximum opportunity, maximum impact. The extensive tax benefits and chance to make a difference speak for themselves, so why wouldn’t you take advantage of this 2-for-1 chance to do good, look good, and make some extra cash while you do it?

Want to learn more about Opportunity Zones? Contact us today!

Step-By-Step Investment Process