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November 16, 2018
How can you help others and potentially reduce your tax liability? The most common way is with charitable gifts. However, that’s not the only option. For certain individuals, the Opportunity Zones Program, begun earlier this year, may be an effective tax strategy.
The Opportunity Zones Program was created to lure investments into neighborhoods that state governments have identified as being severely economically distressed (Opportunity Zones). Taxpayers with realized capital gains who roll them into a qualified investment in an Opportunity Zone (OZ) can defer taxes on those gains and perhaps reduce the taxes due.
Some examples of qualified OZ investments include:
Depending on the length of time the OZ investment is held, the capital gains tax is deferred and in some instances reduced.
Let’s look at a hypothetical example to better understand how the OZ program works:
The decision to participate in the OZ program should not be driven solely by the potential tax benefits. You also have to assess whether the investment fits with your asset allocation and if your capital gains are large enough to meet the minimum investment requirement.
In addition, it’s essential to perform due diligence on any investment opportunity, especially given the newness of the OZ program. You’ll want to work with a real estate promoter who has experience with:
Our experienced tax and investment advisors can help you evaluate whether the Opportunity Zones Program makes sense for you given your goals and current tax situation. If it does, they’ll then work with you to integrate the strategy into your overall financial plan. Contact Cerity Partners to learn more.
Please read important disclosures here.
Len is a Partner in the New York office and has more than 30 years of wealth management experience, specializing in taxes, financial planning, and...
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