Accessibility menu is on
Article provided by: Galena Equity Partners

Opportunity Funds Real Estate

Opportunity Funds Real Estate

The essence of opportunity funds for real estate is that it is a distressed rural or urban community that fits the qualifications of the local, state, or federal government. Localities that qualify as Opportunity Zones have to be qualified by the state’s designation. The capital gains or tax treatment programs offer unique tax benefits.

Tax benefits of Opportunity Funds

Temporary capital gains

The first tax benefit that investors enjoy is a temporary deferral of the taxable income. The deferral is applicable for capital gains that are a reinvestment of the Opportunity Fund.

Improvement of the capital gains

The second tax benefits investors enjoy the basis of capital gains. It is vital to note that the basis increase by at least ten percent when the investor holds the account for a minimum of five years. An investment that holds its position for at least seven years gains additional basis percentages by at least five percent. The continual additions help investors exclude the fifteen percent that would otherwise be present in the original taxation program.

Permanent exclusion

Investors who hold their initial investment for at least ten years earn a permanent exemption from taxes. You should however, note that the exclusion is only applicable to gains from investments of the Qualified Opportunity Zone.

The above details mean that a $500,000 capital gain of the traditional asset will give the investor a $119,000 tax reduction. The investor could earn additional capital gains as per the indicated percentages. The final amount depends on several factors:

  • The state’s tax law
  • The current filing status
  • The basic income
  • The overall return from the Opportunity Zone
  • Length of the investment

How do the 1031 Exchange and Opportunity Funds tax benefits compare?

Savvy real estate investors use either of the programs and still earn practical tax benefits. Opportunity Funds have a strategic plan to offer long-term benefits on long-term investments. It also allows investors to direct unused capital gains into other areas of investment. The investors have an eighty-five percent taxation on the original investment, and a better offer for a long term investment.

Do you need to live in an Opportunity Zone to gain tax benefits?

You can receive tax benefits if you work, live, or have a real estate business in an Opportunity Zone. The only requirement is that your property qualifies for the standards of Opportunity Funds real estate assets.

What are the most important considerations before investing?

Investors ought to be very careful about making investments based solely on tax benefits. They can use the following standards to ensure the real estate will fetch the right tax benefits:

  • The investment should be good enough to generate excellent benefits outside Opportunity Zones.
  • Choose a group with a good reputation in Opportunity Zone investments.
  • Be aware of the compliance regulations that attribute this type of investment.
  • Partner with tax advisors who will offer insight about regulations that are not clear from the IRS

Galena Equity Partners has several complete residential projects. We understand the dynamics that define a successful and offer Opportunity Funds real estate with the best taxation conditions. Contact us today for more information on how we can help you make the most significant leap into financial freedom.

We welcome your comments!

Living in Los Angeles

Amid global concern about COVID-19, we will continue to be here for our customers.
As people and companies all across the country take additional preparations to protect against the Coronavirus (COVID-19), we acknowledge that your mortgage concerns will likely not be taking a break. At this time, we will remain open full-time and will continue to service our customers with the same fast response times you’ve come to expect from us.
Due to the increasing number of reported cases in the U.S., we are continuously monitoring the situation. We will also continue to actively assess the necessary actions we need to take in order to ensure the health and safety of our customers, employees, and their families. We hope that you will join us in taking some basic and important measures, such as frequent hand washing, to keep communal risk low.