Our country’s tax system leaves a lot to be desired. Without you necessarily realizing it, the government has a way of engineering where you put your money, so it benefits their interests. What that usually means is areas that are typically well-funded and affluent are the first to receive investment dollars.


It’s the more rural, off-the-grid locations that could truly benefit from more investments to bolster their economy and infrastructure. These areas and the people living there never get the opportunity to rise up in society and improve their condition.


To combat that, our government has actually done a bit of good. They’ve created something called “Opportunity Zones.” Opportunity Zones allow you to pay greatly reduced taxes on your investments and contribute in a meaningful way.



How Opportunity Zones Work

Here’s the idea: you can invest your money into special funds for areas that are designated as underdeveloped and in need of investment. Underdeveloped areas are identified through the census where a certain percentage of the population lives below the poverty line. An obvious example would be Detroit, but there are less obvious zones in Manhattan as well. It’s really capitalism at its best because it gives investors an opportunity to take a chance on these areas that otherwise would not be the target of investment opportunities.


Opportunity Zones hold an incredible tax advantage, that you’d probably have to dig deep in the US tax code to uncover yourself. In fact, I’ve been surprised how many people don’t know about Opportunity Zones.


We’ve identified an Opportunity Zone in Fultondale, Alabama where we have an opportunity coming up very soon (more on that later).



Why Should You Care About Opportunity Zones?


1. Defer capital gains taxes of previous investments.

Let’s say you have an appreciated asset, something in real estate or a stock. You can cash out on that asset and invest your money into an Opportunity Zone. With that investment, you can defer capital gains taxes for up to ten years. The longer you hold onto you investment, the greater the tax benefits.

During that time, you will pay $0 on that money. After ten years, instead of paying taxes on those gains, you can roll them into another Opportunity Zone and delay taxes for another several years, all the while paying 0% on that investment.



2. Earn a 10-15% discount on the taxable value of your original capital gains.

Remember, Wall Street has no 1031 Exchange. When you take money out of Wall Street, you’re going to pay capital gains on that money. Bottom line.


Let’s say you have $1M of capital gains that you’re taking out of Wall Street and putting into real estate. With a deal of $5M and 80% leverage, you have $4M debt.

Now, say you hold it for 10 years, you can defer those capital gains taxes during that time. When you think about the time value of money over those ten years, of course you want to defer payments! Plus, with inflation that money’s going to be worth less.


Over time, that $5M at 80% leverage went to $10M. Let’s say you still owe $2M on the debt to the bank but you’re still walking away with $8M. So what do you pay taxes on? Nothing! Because the gain is tax-free during that 10 years.


The money gained on that Opportunity Zone could be rolled into another opportunity, so you never have to pay taxes on the capital gains. You could also donate the money to charity, again deferring taxes on the capital gains.


With something like this, you don’t sell it before you die. If you die with it in your name, it goes on to your heirs and they receive it at a stepped-up level, meaning they don’t pay capital gains taxes either. So, bottom line: hold onto it.


*We are not CPA’s and encourage you to consult with your own advisor about how Opportunity Zones would affect your taxes. We are not giving tax advice.*



3. Defer capital gains taxes on Opportunity Zone investments.

Holding your investment for the maximum time allotment will allow you to defer capital gains taxes entirely!


Sure, you pay property taxes, sales taxes, income taxes and all that, but you’re not paying gains taxes, and that’s a pretty high motivation in itself.



4. Make an impact investment.

Basically the government is saying, “we want you to invest in these areas and help the people in these areas”, so they’re creating tax incentives for you to put your money there. It’s an impact investment more than anything else. It’s not just about avoiding taxes and making money.


Opportunity zones will also create more jobs in the area that will in turn create more tax money that can be funneled back into the community.


I hear so many people saying they want to invest money, they want it to be something safe and secure, and they want to make a difference. That is what Opportunity Zones will allow you to do.




Get On Board With Opportunity Zone Investments

Opportunity Zones are insanely advantageous! You’d be a fool not to take advantage of these opportunities.


Let’s recap. With an opportunity zone, you can:

  • Defer capital gains taxes on your prior investments
  • Earn a 10-15% discount on taxable gains
  • Completely eliminate capital gains taxes on your Opportunity Zone investment
  • Make an impact investment and inspire real change in people’s lives


This is the only time I have been aware of Wall Street investments being able to defer capital gains. I’ve never heard of that before! It’s a great opportunity.


Sounds like an all-around winning situation.


As I mentioned earlier, we have an opportunity coming up in Fultondale, Alabama that fits nicely into one of these opportunity zones. I’d love to tell you more about it.


We are going to be hosting a webinar soon on our Opportunity Zone project, and we’d love to have you participate. If you’re not already a part of our mailing list, get in touch for access to the webinar.


When You’re Ready, We’re Here


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How to Turn $1M into $8M with Opportunity Zones
Do you know about Opportunity Zones? See how they make a positive impact. Plus, learn about their tax advantages and other long-term benefits here.