The Opportunity Zones program offers three tax benefits for investing in designated communities through a Qualified Opportunity Fund (“QOF”):
- A temporary deferral of taxes on capital gains reinvested in a QOF. Taxes can potentially be deferred through December 31, 2026.
- A step-up in basis for capital gains reinvested in a QOF. The basis is increased by 10% if the roll-over investment is held in the QOF for at least 5 years, and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
- A permanent exclusion from federal taxes on capital gains created within the QOF, if the investment is held for at least 10 years (lesser taxable exclusions apply for shorter holding periods). This exclusion only applies to gains accrued during the term of the investment in a Qualified Opportunity Fund.