Looking for a simple way to save money buying real estate? Find out how buying in Qualified Opportunity Zones can help you find the best investment property deals.
Investing in Qualified Opportunity Zones Offer many benefits to investors in Chicago and all across the country. Investing in these areas offer tremendous tax benefits along with the ability to give back to communities that are considered distressed in your area.
What Is A Qualified Opportunity Zone?
In 2017, the Tax Cuts and Jobs Act created Qualified Opportunity Zones to help spur job growth and economic development in distressed communities across the United States. They offer tax incentives to encourage those individuals with capital gains to invest in undercapitalized communities. When an investor purchases property in an area deemed to be a Qualified Opportunity Zone, the will receive tax benefits and may be able to defer tax on capital gains. Investments in Qualified Opportunity Zones must be made via an Opportunity Fund in order to qualify for all of the available tax benefits. An Opportunity Fund may be a partnership or corporation set-up with the intent of investing in these Zones. They must hold 90% of their assets in Qualified Opportunity Zones, and they must be certified according to the IRS regulations.
Qualified Opportunity Zones are located all over the country in both rural and metropolitan areas. About 12% of census tracts throughout the USA are considered Qualified Opportunity Zones. These zones will typically have higher unemployment rates, higher poverty rates, and lower household incomes. Home values and the amount you are able to collect is often lower, however, in many of these communities, rental properties are in high demand. You do not need to live, work, or own property in the zone in order to take advantage of the opportunity to invest. All you have to do is choose to defer the tax on that gain. Many investors will utilize the map tool to discover Qualified Opportunity Zones in cities where they are interested in investing. The first zones only covered 18 states, but today there are Zones all over the country as well as Washington DC. Once an investor narrows the Zones they are interested in, they can work with a professional such as Chicago Home Buyers to help them find the best property deals in the area.
How Can You Benefit From Buying In A Qualified Opportunity Zone?
Investors can benefit in a number of ways when buying property in a Qualified Opportunity Zone near Chicago. Some of the tax benefits include being able to defer up to nine years of capital gains that are reinvested into an Opportunity Fund. Investment firms, large corporations, start-ups, and private equity firms are all taking advantage of investing in Qualified Opportunity Zones near the Chicago area. If the property is owned for five years, there will be a 10% reduction in tax on the gain. If they hold the property for seven years, an additional 5% reduction is added. For future capital gains on investments accrued while in an Opportunity Fund, If the property is help for ten years, gains that are realized on investments made in connection with a deferral election are excluded from taxes.
What Are The Downfalls To Investing In A Qualified Opportunity Zone?
While the tax incentives may be there, there isn’t any guarantee that the properties will appreciate in the area as quickly as you would like them to. While this program was designed to help spur job growth and revitalize communities, having people invest in the area doesn’t always cut it. You may find that your purchase isn’t gaining value and that you are actually losing money on the deal. If the property isn’t in the best area, it may be more difficult to resell when you need to. If the property is reclassified, the property will still be treated as Qualified Opportunity Zone property for five years or until the property is no longer help by the Opportunity Fund.
To learn more about Qualified Opportunity Zones, you can read up on them on the IRS website or you can reach out to our team with any questions you have about the process! T^hings can get a little confusing when investing in Qualified Opportunity Zones near Chicago. You will likely want to have your accountant help you along with the process to make sure you are capitalizing in every way possible. We can help you find the best available properties located in the Qualified Opportunity Zones that you are interested in! Get in touch with us to tell us what kind of property you are after and how much you want to spend. If you are looking for a Qualified Opportunity Zone with many profitable property options, we are here to help!