If you have invested in stocks, real estate or other assets that have appreciated in value, historically you cannot sell those assets without paying huge taxes.
Now, by investing in a qualified opportunity fund you can sell your appreciated asset and temporarily defer your original capital gain until 2026. You’ll also be able to reduce your capital gains expense through a 10% step-up basis if you hold the investment for 5 years, and an additional 5% step up basis if held for 7 years.
If you hold your investment in a Qualified Opportunity Fund for at least 10 years you will completely eliminate the capital gains from the gains generated from your investment in the fund.
As an investor you receive significant tax benefits that include:
Temporary Capital Gains deferment: By investing in a qualified opportunity fund you can defer your original capital gains until the earlier of December 31st, 2026, or when your Opportunity Fund investment is sold.
Reduction of Original Capital Gains through 10-15% step-up basis (5-7 years): A taxpayer who holds an interest in a Qualified Opportunity Fund for at least five years can increase his investment basis by 10% of the deferred gain (and an additional 5% if the investment is held for seven years), thereby excluding up to 15% of the original gain from taxation.
100% Tax Free Capital Gains (10+ years): If you wait 10 or more years before selling the Opportunity Fund investment, all of your gain from that reinvestment is 100% tax free.