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QUALIFIED OPPORTUNITY ZONE

POTENTIAL TAX BENEFITS

AVAILABLE TO A QOZ INVESTOR

Qualified Opportunity Zone legislation offers QOZ investors a powerful potential combination of tax incentives, including deferral of capital gains taxes, a step-up in basis and tax-free growth. Prior to December 31, 2026 (the "Investment Cutoff Date"), if an investor sells any asset (not limited to a real estate asset) that generates a capital gain and invests an amount equal to that gain (or a lesser amount} in a QOZ within 180 days thereof, the taxpayer could receive the following benefits: 

DEFERRAL

of the taxes owed on the initial capital gain.

REDUCTION

of that initial capital gain by 10 percent if the QOZ investment is held for five years.

ELIMINATION

of capital gain taxes from realized appreciation in the QOZ, provided the investor's holding period is 10 years or more.

QOZ INVESTMENT TIMELINE

THREE ELEMENTS OF TAX BENEFITS:

HELD FOR 5 YEARS

2021

-Investment in QOZ

-Asset sale - generating capital gain

2022

2023

-Deferred zero basis capital gain stepped up 10%

2024

2025

-Deferred zero basis capital gain stepped up 10%

HELD FOR 10 YEARS

2026

-Capital gains taxes due on the portion of the deferred capital gain not previously stepped up

2027

2028

2029

-Basis in QOZ investment stepped up to fair market value

-Forgiveness of capital gains taxes from QOZ asset appreciation

2030

2031

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This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.

 

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.

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​Risks associated with 1031 exchange- A 1031 exchange has an identification period of 45 days from the sale of the relinquished property to identify a potential replacement property or properties depending on the value of the previous property. To defer all capital gains tax, you must reinvest the entire net proceeds from the sale of the relinquished property into the replacement property and acquire debt on the new property that is equal to or greater than the debt on the property that was just sold and relinquished.

 

Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. 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.

 

Institutional-grade properties generally refer to a property of sufficient size and stature to merit attention from large national or international investors, and typically have the characteristic of high-quality assets in major markets and at price points beyond the reach of individual investors and smaller partnerships.

 

This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of the services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Bart Harrison at 205-533-2052 or email bart@1031legacy.com.

 

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