Urban areas have long struggled to spread development interests more equitably. One part of town may be bustling, offering a quality of life many people are willing to pay top dollar for. Meanwhile, a neighborhood a few miles down the road may be struggling with abandoned storefronts and urban blight.
The federal government is aware of these disparities. To help address the problem, “Opportunity Zones” were established in the 2017 Tax Cuts and Jobs Act. Developers who choose to invest in Opportunity Zones can receive significant tax breaks.
The governors of each state identified zones of opportunity. Zones must meet certain median incomes and poverty rates. There are numerous Opportunity Zones in Houston and throughout Texas.
Developers can benefit from tax incentives
There are certain steps investors must take to be eligible for the tax breaks provided by Opportunity Zones. You will have to create a qualified opportunity fund for investing in the designated area. Any capital gains taxes will be deferred for funds that are reinvested into the development.
The longer that you invest in the Opportunity Zone development, the more attractive the incentives become. The goal is to help ensure investors are committed to making a long-term investment into a struggling community.
For certain investors and developers, the tax incentives are powerful incentives. All investments involve some degree of risk, even those in established neighborhoods. Development in an Opportunity Zone could provide you with a ground floor opportunity to have a foothold in the next up and coming neighborhood. A skilled legal professional can help explain all incentives for development and whether doing so can help you meet your business goals.