Who Can Invest in Opportunity Zone Funds?

Opportunity Zones focus on low-income areas within the United States to help them develop and grow. Let’s find out who can invest in opportunity zone funds.

Understanding Opportunity Zone Funds

Before understanding qualified opportunity funds, it’s essential to learn about the basics of opportunity zones. OQZs, or qualified opportunity zones, are nominated communities through the state, becoming certified by the Treasury Department to qualify. All 50 states are approved zones by the Treasury Department.

A qualified opportunity fund includes any investment vehicle organized as a partnership or corporation to invest in eligible opportunity zone properties, holding at least 90 percent of assets in QOZ properties. It can increase or decrease in value throughout the holding period.

Qualifications for Investing in QOZ Funds

Now, let’s determine who can invest in opportunity zone funds. Qualified opportunity zone funds can become established via taxpayers by filing Form 8996 and submitting it with their federal income tax return. This form certifies individuals, corporations, and partnerships as organizations to invest in QOZs.

These investments can be made with partnership interests, stocks, and business properties. Funds must improve the qualifying property significantly. Furthermore, QOZ funds can invest in multiple qualified opportunity zones if they invest at least 90 percent of their assets into QOZs.

Reasons To Invest in QOZ Funds

In an instance where investors sold assets, such as a business, investments, and real estate, they’ve received a significant capital gains tax liability. Alternatively, if an investor shows interest in offloading an investment, capital gains consequences prevent them from doing so. Unloading capital gains into qualified opportunity funds can defer capital gains tax liability, diversifying their investment portfolios and making a favorable impact. The main tax benefits fall into two categories: deferring capital gains tax until 2026 and increased tax benefits through holding onto opportunity fund investments.

Qualified opportunity funds also offer investors a method of portfolio diversification outside of stock and bonds markets. Instead, they can branch into startup businesses and real estate. They can also select from multi-asset funds or single-asset investment opportunities that invest in companies or properties. They are often spread across various geographies or asset classes.

Sera Capital allows individuals to get involved in Opportunity Zone investments to diversify their portfolios and improve low-income areas. Our Opportunity Zone advisors provide guidance and education to investors who want to get involved, teaching them helpful terminology and rules to ensure a successful investment. Schedule a 30-minute call today if you have questions about our services.