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28 Feb 2019

What You Need to Know to Leverage Qualified Opportunity Zones


James de Gorter

Union Realtime

The situation

In December of 2017 Congress passed the Tax Cuts and Jobs Act of 2017. A significant piece of the legislation created incentives for investment in low income communities called Qualified Opportunity Zones (QOZ). Self-storage investors were clearly potential beneficiaries of the legislation but up until recently details of the incentives were scarce. On October 19th, 2018, the IRS provided their initial guidance on the legislation which outlines the significant tax advantages self-storage investors can qualify for.

How to qualify

To qualify for the tax incentives an investor must meet certain criteria.

Capital requirements:

Qualified Opportunity Fund (QOF) requirements:

Property requirements:

Details of the criteria and edge cases can be referenced in the IRS guidance documentation.

The benefits of investing in a QOF

The primary reason for investing capital gains in a QOF is to defer capital gains tax until December 31st, 2026 or the sale of the QOF investment; whichever comes first. By deferring capital gains tax investors can increase their purchasing power in the QOF investment. If the investor holds on to QOF investment for 5-10 years they can further benefit by reduction in certain capital gains.

QOF investment held for:

Where can I find a QOZ?

QOZ are economically distressed communities nominated by the state and certified by the Secretary of the U.S. Treasury. We have loaded all the zones into Radius so that users can quickly identify and analyze properties in these zones. For help on how to use this feature check out the video below.

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