President Trump has brought a lot of changes into how we pay taxes. The tax system now includes a complicated and generous tax break that is designed specifically to bring money into areas called Opportunity Zones, also known as O-zones.
The plan was first discussed in December 2017 and received a lot of flak back then, but details got clear just now.
There are a total of 8,700 Opportunity Zones in the country including rural hamlets and run-down cities. The authorities decided on these O-zones after much research to concentrate on places that actually need help.
Plus, the tax system is designed in a clever manner. You cannot directly invest money into these zones just to enjoy the tax benefits they offer.
Investors must connect with a qualified O-fund to move ahead with the investment. However, a good thing is that investors will have the opportunity to invest in anything, from startups to real estate to other such options.
The only condition is that the investment must be made in an Opportunity Zone. Plus, the opportunity should not be barred by the Congress. Some barred options include massage parlors, liquor stores and casinos.
Here’s how the system works: You sell assets and invest the money into an Opportunity Fund.
It is a three-part tax break that many say is designed to only help the rich. Investors will enjoy tax deferral on their 2018 gains (until 2026) with 15% deduction in the year 2026. Additionally, they will enjoy tax-free growth for up to 10 years.