Zoning In: New Tax Benefits of Investing in Opportunity Zones
By Jonathan Jenkins and Andrew Steffensen
Overview
If you are a lawyer who represents a taxpayer who recently realized a short-term or long-term capital gain, your client may be looking for ways to avoid recognizing that capital gain and the associated tax bill. Thanks to a new tax incentive program, a taxpayer who has realized capital gains may have the opportunity to invest qualifying capital gains[1] in certain qualifying investments and (i) defer the recognition of such capital gains until December 31, 2026, (ii) reduce the amount of the capital gains required to be recognized by up to 15%, and (iii) entirely avoid paying any capital gains tax on any additional capital gains realized from such an investment. This post summarizes this new incentive, more commonly known as the opportunity zone tax incentive.