While there have long been tax advantages to owning real estate, there are two little-known tax-smart ways to invest: Opportunity Zones and 1031 exchanges.
The Opportunity Zone tax incentive allows investments in federally designated, low-income neighborhoods and Qualified Opportunity Funds are a vehicle to make these investments. They have two advantages: tax deferral and potential tax reductions.
If you sell a capital asset, you can invest the gain within 180 days. Taxes are deferred until the 2026 tax year, or until you sell the investment, whichever comes first. Depending on when you make the investment and how long you hold it, taxes on the gains can be reduced 10% or more.
These are for investors who want to sell property and acquire another. By following certain rules in a 1031 Exchange, you can postpone some or all of the tax that would normally be due on gains from the first property.
Because the simultaneous swap of property is rare, the rules allow for an intermediary to hold your sale proceeds until you find a replacement. The rules are strict, so it is best to work with an expert advisor prior to exploring this tax-saving technique.
Our tax and advisory team is ready and able to partner with you this Spring. Contact Alloy Silverstein for guidance on your specific situation.
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