Most investors know diversifying their portfolios adds greater stability and increase their ROI. While opportunity zones play a substantial role in diversification, many investors still find these opportunities confusing. Learning about opportunity zones is essential for investors who want to have access to diversified investment options.
What Are Opportunity Zones?
Opportunity zones are titled so because the federal government offers tax incentives to those who invest in these areas. An opportunity zone may be a commercial or residential building or a piece of land located in impoverished areas of the country. Those who would like to discover more about opportunity fund investment should continue reading.
Real Estate Investments Add Variation to Your Portfolio
There are multiple ways investors can diversify their portfolios and increase their return on investment. One way to add variation is through real estate. Many of the world’s top investors recommend people invest around 15% or more of their portfolio towards real estate investments.
Unfortunately, fixed income assets are only offering low yields, prompting many investors to diversify their portfolios with real estate investments. Because real estate often offers protection against inflation, opportunity zones are ideal for investors who want to improve their diversification.
What Are the Benefits of Investing in Opportunity Zones?
Those who are considering investing in opportunity zones need to learn about the benefits. The following are the top three benefits of investing in opportunity zones.
· When people invest in opportunity zones, they can temporarily defer their taxes on earned capital gains. Investors simply place their capital gain assets into opportunity funds. Taking this investment step allows for tax deferment until the end of 2026 or until the investor disposes of the property.
· Another advantage of investing in opportunity zones is a step-up in previous capital gains. If the investor places the capital gains in opportunity funds for at least five years, the investment increases by ten percent. When invested for seven years, the investment increases by fifteen percent.
· Opportunity zone investors also benefit from the permanent exclusion of their taxable income on all new capital gains. If the investment is held for at least ten years, investors will not pay any taxes on capital gains resulting from their investment.
Tips For Investing in Opportunity Zones
Those who are new to investing in opportunity zones need to learn about the requirements. Discovering the requirements will help new investors get started on the process. The following offers some tips on opportunity zone investment.
· Only the capital gains need to be invested, not the entire proceeds.
· Capital gain can be deferred from any sale, not just for opportunity zone investment.
· Opportunity zones are available in all 50 states.
· People must invest their capital gains within 180 days.
· Investors can also invest more money than their capital gain funds.
Discover More Information
With opportunity zones, tax deferment advantages allow investors to save money while helping impoverished areas begin to thrive. Those who have never invested in opportunity zones need to consider getting professional help to guide them through the process.
Although these investments do tie up money for at least five years, most investors feel opportunity zones are well worth any minor disadvantages they may experience. While opportunities abound, investors need to get on board and learn about their options.
Opportunity zone investment allows you to diversify your portfolio. With so many advantages, it is no wonder many investors have added this investment strategy to their portfolios.