The Qualified Opportunity Zone program was established through the Tax Cuts and Jobs Act of 2017. It provides tax advantages to taxpayers who opt to invest in one or more economically distressed and underserved communities that the IRS and the U.S. Treasury have designated. There are currently certified zones in all 50 states, Washington D.C., and U.S. territories. Investors can enjoy tax advantages of the program in two distinct ways: Tax Deferral and Tax Elimination.

Tax Deferral with QOZs

Before the establishment of the QOZ program, the opportunity to defer capital gains taxes was primarily relegated to investment property owners engaging in a 1031 exchange. However, one of the things that sets the QOZ program apart from other tax deferral opportunities is it can be used to defer capital gains taxes on the sale of any property type. This includes stocks, bonds, mutual funds, jewelry, art, business interests, and cryptocurrency.

The tax deferral provisions of the QOZ program apply to transactions occurring between December 22, 2017, and December 31, 2026. By investing capital gains from the sale of an asset into a Qualified Opportunity Fund (which is the required investment structure of QOZ investing), a taxpayer can defer paying capital gains tax until January 1st, 2027. This enables the investor to keep full gains at work in the QOF investment for several years before recognizing the gains for tax purposes.

Tax Prevention with QOZs

Taxpayers who remain invested in a QOF for ten years will receive a step-up in basis to the current market value on the new growth on invested monies of their investment property. This allows investors to prevent new capital gains taxes on any gains earned while invested in the QOF. 

The ability to prevent taxable gains on the appreciated value of an investment that has been held for ten years or longer offers investors a rare opportunity to maximize the potential return on their investment.

Is a QOZ Investment Right for You?

If you have a long-term investment horizon and have sufficient liquidity from other sources, the potential tax benefits of a QOZ investing may offer a powerful wealth accumulation advantage. To learn more about QOZs and other tax-advantaged private real estate investments, download our free ebook, Tax-Advantaged Investing: The Power of Private Real Estate.”

If you would like to explore whether a private real estate investment might be a good fit for your portfolio, the professionals at Fortitude Investment Group are here to help. Contact us today to schedule a consultation!

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Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.   

This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. 

Diversification does not guarantee a profit or protect against a loss in a declining market.  It is a method used to help manage investment risk.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results.  Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney.

Daniel Raupp

Under Daniel Raupp's guidance since 2000, Fortitude Investment Group, LLC has guided clients into over $1 billion worth of securitized real estate investment offerings directly and indirectly, in both the DSTs for 1031 Exchanges and REITs. In the areas of real estate, tax advantaged investments, insurance, retirement, and estate planning, he is able to set up comprehensive, individually tailored client portfolios designed to help remove market volatility and maximize income potential without undue risk.

Inspired by his father’s dedication to customer service and hard work, Daniel directs a range of strategic initiatives in the firm to successfully leverage core competencies in tax efficient investing, alternative investments, and operational excellence to create customer value. His credentials include a Series 7 General Securities Representative (GS) License, Series 24 Principal of General Representatives License, Series 63 Uniform Securities Agent License, and a Life/Accident and Health Agent License. Check Daniel’s background on FINRA’s BrokerCheck.

This is for informational purposes only and is not an offer to buy/sell an investment. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisors for guidance regarding your particular situation.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA) Fortitude Investment Group is independent of CIS, CAM, and CIA.

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