Thanks to the 2017 Tax Cuts and Job Act, investors in the United States can benefit from investing in Opportunity Zones.
What exactly is an Opportunity Zone? It’s a special designation that a city can give to lower income areas or neighborhood and they are very similar to 1031 Exchanges.
When a real estate investor sells one of their properties, they can invest the proceeds from the sale of their property into an Opportunity Zone and defer paying Capital Gains on the sale of their property for seven years.
Opportunity Zones now allow an investor to defer capital gains taxes by trading one asset with another asset in a different asset class
Where Are Opportunity Zones Located?
As of April 2019, there are Opportunity Zones in all 50 states including the Virgin Islands, Guam, and Puerto Rico.
In California there are currently 879 Opportunity Zones, 871 are located in low-income areas while 8 are located in non-low-income areas.
97% of California’s opportunity zones located in urban areas while 5% are located in rural areas.
If you’re interested in investing in Opportunity Zones in the San Diego area, these areas of investment can be found in Golden Hill, South Park, and Barrio Logan.
Nevada currently has 61 Opportunity Zones while Arizona has 144 with 61 located in Maricopa County and 28 in Pima County.
Who can invest in an opportunity zone?
Investors with large capital-gains bills are appropriate candidates for these funds. But Aaron Clarke, a wealth advisor at Halpern Financial in Ashburn, Virginia, says it’s a limited market. “They are really only appropriate for serial entrepreneurs – people who are real estate investors by trade (not a hobby) and people who have a strong local knowledge of the opportunity zone they plan to invest in,” he says. Currently, most qualified opportunity zone investments are available to accredited investors. Investors typically need to be high-income earners, such as those with annual incomes of at least $200,000 who file with a single status, or have a net worth above $1 million, excluding their primary residence.
Source – US News
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