Anyone in the real estate business should be aware of the new, powerful, and flexible Opportunity Zone (OZ) program, which became effective January 1, 2018, as part of the Trump Administration’s Tax Cuts and Jobs Act (2017 Tax Act).
The OZ program allows up to a seven-year federal (and in most states) tax deferral on short-term or long-term capital gains, resulting in a 15 percent permanent tax reduction on the reinvested gains after holding the OZ investment for at least seven years, and a complete federal tax exemption of any post-reinvestment appreciation in the OZ investment(s) after ten years. It is important to note that California, Massachusetts, Mississippi, and North Carolina have not adopted the federal provisions. OZ- related tax benefits are not available in these states; therefore, real estate transactions may be best suited for Section 1031/ Like-Kind Exchanges rather than OZ investments.
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