You may be hearing more about Opportunity Zones recently, they have been around for some while now, (2017) but mostly in conversation with long term real estate investors.
Opportunity zones are similar in ways to 1031 like-kind exchange, which allow real estate investors to defer taxes on gains from the sale of a property by reinvesting the proceeds from the sale in another property within six months. A key difference is that 1031s do not allow investors to permanently exclude any portion of their profit from taxes, which the opportunity zone program allows for investments held for at least 10 years.
“To take advantage of the tax benefits, investors need to invest capital gains in vehicles known as qualified opportunity funds, which aggregate money from investors and use it to acquire and improve properties in opportunity zones, within 180 days of the sale of an asset. Investors can choose to work with an existing opportunity fund that plans to invest in an area or type of property they want to put money into or form their own fund. For their part, opportunity funds must invest at least as much in improving a property as they pay for it, and are required to invest 90 percent of their assets in properties located in opportunity zones.”
Unlike 1031 like-kind exchanges, which require an intermediary to hold onto the proceeds that come from the sale of property while the seller lines up another investment, funds intended for investment in an opportunity zone don’t need to be kept separate. Investors simply have to file Form 8949 with their income taxes to report the investment to the IRS. That said, the rules for these investments are complex and have not yet been finalized by the government. It’s advisable to seek professional guidance before proceeding. You can find a directory of opportunity funds at the National Council of State Housing Agencies website at ncsha.org.
It’s up to each opportunity fund to determine the minimum investment it will accept, but you can get started as an opportunity zone investor with a relatively modest amount of money.
For some answers to specific questions, click through to the IRS page. https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions
The list of designated Qualified Opportunity Zones can be found at Opportunity Zones Resources and in the Federal Register at IRB Notice 2018-48. Further a visual map of the census tracts designated as Qualified Opportunity Zones may also be found at Opportunity Zones Resources. You can find 11-digit census tract numbers, also known as GEOIDs, using the U.S. Census Bureau’s Geocoder. After entering the street address, select ACS2015_Current in the Vintage drop-down menu and click Find.