The Tax Benefit
Reduction of capital gains
Deferral of recognized capital gains
Elimination of capital gains
If an investor holds a QOZ investment for at least 10 years, then no tax is paid at all on any appreciation of the deferred capital gains in the QOZ investment
If the investor holds a QOZ investment for:
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at least 5 years, then 10% of the deferred gain is permanently forgiven (tax paid on 90% of deferred capital gain)
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at least 7 years, then an additional 5% (total of 15%) of the deferred gain is permanently forgiven (tax paid on 85% of deferred capital gain)
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defer realized gain from appreciated asset, in most cases an investor must reinvest the gain into a QOF within 180 days of realizing the gain
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The 180-day period ends when capital is contributed to the applicable Qualified Fund, not when capital is committed
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May defer capital gains tax until the "Recognition Date" defined as the earlier of the date on which the investment is sold or 12/31/2026
Today (2020)
2024
2026
2026 YE
2029 & Beyond
Invest capital in QOZ Fund
Become eligible for 10% tax reduction on deferred capital gains
Become eligible for 15% tax reduction on deferred capital gains
Original Capital Gains Tax Due
No Capital Gains Tax on QOZ Fund Investment appreciation