An elegant white clock featuring 'DANIELLE LAZIER REAL ESTATE LOGO' on a sleek black background.Vivre Real Estate logo

Paying Capital Gains Tax on your Real Estate? Discover Opportunity Zones

April 22, 2019

With the 2017 Tax Cuts and Jobs Act, you may have heard about the tax advantages of opportunity zones.

What Are Opportunity Zones?

Opportunity zones are designated areas of economically distressed communities identified by the U.S. Treasury Department where new investments may be eligible for preferential capital gains tax treatment. By investing in qualified opportunity funds, an investor can defer and reduce their tax liability on their capital gains. They can also potentially receive tax-free treatment for all future appreciation. If done right, this tax advantage is huge.

Opportunity Zones At Work

A lot of words are packed in here, so let’s illustrate the opportunity with an example:

  • Let’s suppose you have a capital gain of $1,000,000 due to a recent sale transaction of stock, a business, or another piece of real estate. Your capital gains tax liability (the amount you’d be taxed) might be roughly $371,000, depending on the type of asset sold, and taking into account the current Federal capital gains tax rate, State taxes, and the Investment Healthcare surtax.
  • You have the option of investing the equivalent amount of your capital gains of $1,000,000 in a Qualified Opportunity Fund, to defer and reduce your tax liability if you hold onto the Opportunity Fund for at least seven years.
  • After seven years, the capital gain is reduced by 15%, and you must pay the tax on the original deferred capital gain, let’s now say $850,000 capital gain. The estimated tax in year seven is $315,350.
  • The savings and the upside: That’s a tax savings of $55,650 by deferring for seven years, and the opportunity upside of the original $371,000 you received by deferring the tax.  That’s a lot of savings and upside!

Now here’s where opportunity zones really kick into high gear:

  • Any further capital gain by the Opportunity Fund is tax-free after ten years. Let’s think about that for a moment. Tax-free after ten years!
    So let’s suppose the original Opportunity Fund investment appreciates from $1,000,000 to $2,000,000. The new gain of $1,000,000 is capital gains tax-free. Whereas, if you did not invest in a qualified fund, the estimated capital gains tax would be another $371,000, on top of the tax you paid on your original investment 10 years ago.*

Wow, right?

So what are the risks? Well, as with any investment, an investment in a qualified opportunity fund program is subject to various risks, tax law changes, and economic cycles. Since they are in higher risk, economically distressed areas they carry additional risk. But if done right, these can be big upside opportunities on tax savings. If you’re thinking about whether these are right for you, consult with your tax advisor on this.

ABOUT DANIELLE LAZIER + ASSOCIATES

In 2018, Danielle Lazier + Associates sold over $104,000,000 in SF Bay Area residential real estate selling more homes than any other SF Realtor (per MLS). We specialize in listing marketing and home buyer representation. We work with a diverse clientele in terms of budget, property type, and location, but one thing remains consistent: our clients have a clear goal to maximize their San Francisco real estate investment and want us to help them because we deliver both results and an enjoyable experience.

Are you buying or selling a home in San Francisco? Reach out to us for a consultation!

About Virg Cristobal: If you’d like to learn more about Opportunity Zones and how they may fit into your own situation, please contact Virg Cristobal, CFP®, at [email protected], or follow-me on Twitter, @CFP_Virg

Website: https://www.myopenadvisors.com/team/virg-b-cristobal

Yelp logo
296 reviews
View All
Zillow logo
176 reviews
View All
Danielle Elazier Realtor on Google My Business- image of Google my business logo
117 reviews
View All

Danielle lazier real estate team

We care deeply about our clients and our commitment to exemplary results. Working with us should be a good fit for you. If you feel our team is the right fit for you and you’d like to talk with Danielle to make sure, contact us today for your complimentary initial consultation.
Contact Me

Do You Need Another Real Estate Newsletter?

Probably not. Yet, in our biased opinion, you should definitely sign up for our twice-monthly email for market insights, webinar invites, local news, gorgeous homes, and more. We never share or sell your information. And, when you’re ready to work with us, please email or call to discuss your plans. We’d love to help!

Danielle Elazier botanical illustration - 3 different California poppy flower branches. Black and white with line art
WATCH DANIELLE’S LATEST VIDEOS

DISCOVER LUXURY LIVING IN SAN FRANCISCO

YouTube Channel
View Full Street Address SAN FRANCISCO, CA 94114 (415) 528-7355 ©2019 VIVRE REAL ESTATE. ALL MATERIAL PRESENTED HEREIN IS INTENDED FOR INFORMATION PURPOSES ONLY. WHILE THIS INFORMATION IS BELIEVED TO BE CORRECT, IT IS REPRESENTED SUBJECT TO ERRORS, OMISSIONS, CHANGES, OR WITHDRAWAL WITHOUT NOTICE. ALL PROPERTY INFORMATION, INCLUDING, BUT NOT LIMITED TO SQUARE FOOTAGE, ROOM COUNT, NUMBER OF BEDROOMS, AND THE SCHOOL DISTRICT IN PROPERTY LISTINGS SHOULD BE VERIFIED BY YOUR OWN ATTORNEY, ARCHITECT, OR ZONING EXPERT. IF YOUR PROPERTY IS CURRENTLY LISTED WITH ANOTHER REAL ESTATE BROKER, PLEASE DISREGARD THIS OFFER. IT IS NOT OUR INTENTION TO SOLICIT THE OFFERINGS OF OTHER REAL ESTATE BROKERS. WE COOPERATE WITH THEM FULLY. EQUAL HOUSING OPPORTUNITY. ALL INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED AND SHOULD BE INDEPENDENTLY REVIEWED AND VERIFIED.
enteruserclockmagnifiercross