There are new and not very well known opportunities in the market called Opportunity Zones.
They were created by Congress last year and put into place beginning this year. There are certain census tracts in every state in the U.S.—46 in Utah, in fact—that are lower income areas in need of redevelopment. Opportunity Zones allow for states to nominate the areas as they would like to see increased investing in real estate.
When you invest in these Opportunity Zones, you are allowed to defer, reduce, or eliminate your capital gains entirely. This includes single-family homes and commercial real estate. If you hold the property for five to seven years, you’ll get a 10% reduction on your federal capital gains; for seven to 10 years, you’ll get a 15% reduction; and if you hold it longer than 10 years, you’ll pay no capital gains tax on the gains of this property.
As I mentioned, there are 46 Opportunity Zones here in Utah right now, including 15 in Salt Lake County, three in Davis County, and five in Weber County.
Here’s how it works: Imagine that you have enough savings to allow you to invest in real estate; maybe you’ll end up selling another investment property of yours specifically so that you can invest in this Opportunity Zone. If there’s a capital gain from that previous sale, you can defer those gains, reinvest into this property, and then look to pay zero capital gains later on.
The big key is that you have to hold it for 10 years or more to be able to eliminate these capital gains altogether. Hypothetically, if you were to normally pay 25% in federal capital gains tax, eliminating the capital gains would allow you to have a 25% gain compared to investing in areas outside of an Opportunity Zone.
If you or someone you know is interested in investing in an Opportunity Zone, I’ve created automated emails that alert me and my clients about opportunities in these areas. Simply reach out to me and let me know in which areas you’re interested in searching.
Mind you, I’m a licensed real estate agent, NOT an accountant or a financial planner, so it is very important to consult those people on your team as you look at these opportunities.
I hope to hear from you soon!