Opportunity Zones – Reduce Taxes by Investing in Main Street

It’s easy to figure out where tax incentives lie in wait. Just study the tax code.

The latest version of the tax code introduces a new tax shelter … opportunity zones. But … what are opportunity zones?

In this episode of The Real Estate Guys™ show, we dive into what we know about opportunity zones … including three MAJOR benefits.

You’ll hear from:

  • Your opportunistic host, Robert Helms
  • His inopportune co-host, Russell Gray

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Opportunity zones: The basics

There’s a way to pay no tax on certain investments AND heal struggling communities. We’re talking about opportunity zones.

These new geographic tax shelters are encoded in the version of the tax code passed in 2017 … but they’re not totally finalized yet.

That doesn’t mean they’re not important … savvy investors will be absorbing all the info they can BEFORE opportunity zones go into action.

The idea of opportunity zones is to offer a tax-favored investment vehicle for people who already have capital gains in other investments.

Opportunity zones will be located in low-income communities ripe for revitalization … and will be located in every state in the U.S.

The fundamental purpose of opportunity zones is to encourage long-term investments in struggling communities.

Congress has established an incentive framework that is flexible and unique. This is essentially a new class of investment.

These opportunity zones complement existing community development plans. In essence, the project is treating the U.S. like a giant rehab project.

You’ll basically be moving yourself into a pre-identified path of progress. There hasn’t been a ton of incentive for investors to come into these run-down, lower income areas. But NOW there is.

The benefits of opportunity zones

Like we said earlier, the idea of opportunity zones is set, but the legislation is not in action yet. The appropriate documentation and legislation will be in place by the end of 2018.

So NOW is your time to prepare for the future.

There are definite differences between this opportunity and other investments. Generally, you’re required to pay tax when you liquidate capital gains.

But investing in opportunity zones provides three unique tax benefits. Before we get into those, we do want to clarify … this investment is only available for investors who already have capital gains from previous investors.

But not to worry … if you’re a newer investor who doesn’t have any capital gains yet, there are ways to get in on the action. We’ll get into those in the next section.

Now, the three tax benefits …

  1. You can defer your original capital gains tax for up to 10 years. As you probably know, it’s always better to defer taxes than to pay now.
  2. You also get a 10 to 15 percent discount on your original capital gains tax.
  3. AND …when appreciated capital gains are put into an opportunity zone investment, the gains you make from that investment are completely tax free.

There is a timeline. You have to sell the appreciated assets and invest the capital gains into one or more opportunity zone investments within 180 days.

But we want to emphasize … your capital gains from properties in opportunity zone areas will be completely TAX FREE.

No capital gains? How to invest in opportunity zones

The government has a goal here … they want to bring a ton of investment capital to certain areas and swing them around.

In that vein, there is a certain requirement you have to follow to invest in opportunity zones … there is NO tax incentive if you own property in an opportunity zone under your own name.

You have to invest in opportunity zones through opportunity funds.

If you don’t have appreciated assets, you may be wondering how you can start an opportunity fund and get in on this great opportunity.

There are a few options …

  1. Invest in an area near an opportunity zone. You’ll be boosted up by the wave of capital increasing asset values all around you.
  2. Invest as a syndicator. Set up an opportunity fund … and get other investors to contribute their capital gains.

This last point is something to seriously consider … especially when you start thinking about the stock market.

The stock market is hot, but it’s showing signs of faltering. People want to take their capital gains out … but they don’t want to pay taxes.

A fantastic solution? Opportunity funds.

All about opportunity funds

What does it take to put together an opportunity fund?

Opportunity funds do not have investment limitations.

They must be organized as a corporation or a partnership.

They do not require official IRS approval … the fund manager can self-certify the fund simply by submitting a form to the IRS.

The process is designed for speed. It cuts out bureaucracy … and brings locally driven change to areas that need it.

But it also requires investors to make REAL change … for example, one requirement we expect to see is that investors put as much into rehab and construction as they spent to acquire the property.

Opportunity zones mean sending money to the bottom of the market … and making the subsequent changes LAST for the long term.

For a map of tagged and categorized opportunity zones, plus more information, simply send us an email at opportunityzones [at] realestateguysradio [dot] com.

And don’t think this is the last you’ll hear about opportunity zones … we expect this to be a BIG wave in the real estate investing sea, and we’ll be providing more information to our listeners as this new opportunity develops.


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10/2/11: Zero Tax! Deductions and Benefits that Matter Most to Real Estate Investors

Active real estate investors should NEVER pay tax on their cash flow or gains..EVER!  So says CPA Tom Wheelwright, our hero with a zero (taxes that is) and Rich Dad’s tax advisor to Robert Kiyosaki.

And unless you’re Warren Buffett, we’re guessing you’d probably rather pay LESS tax than more.

Maybe when we’re multi-mega-billionaires like Warren, we’ll want to pay more too.  Give us a few years and we’ll let you know. For right now, less tax is better.  We’d rather save on taxes today and use the money to buy more real estate.  Weird, we know…but that’s just us.

The GOOD NEWS is that even while most governments’ appetites for taxes is growing, real estate investors still enjoy some of the best tax deductions and benefits there are!

To learn more about this taxing topic, we flew to Arizona and met face to face with Tom Wheelwright.  He says with proper planning, real estate investors can get their effective income tax rate to ZERO!

Manning the microphones for another exciting escapade into broadcast brilliance:

  • Your host with benefits, Robert Helms
  • Your big zero co-host, Russell Gray
  • A master of brilliant deductions, Robert Kiyosaki’s Rich Dad Tax Advisor and CPA, Tom Wheelwright

Zero tax!  Now THAT sounds pretty stimulating.  In fact, Tom says the tax code is a treasure map to a series of stimulus programs.  So to get your personal economy working better, be sure to organize your investing to maximize tax deductions and tax benefits.

Tom tells us:

  • Why the tax code is a powerful tool for increasing your cash flow and accelerating  your real estate wealth building
  • How to avoid the number one MOST COMMON MISTAKE real estate investors make on their tax returns
  • How to save money on everyday items by using the tax code to make more of your expenses tax deductible
  • Why every dollar saved in taxes is worth five dollars of real estate!

And there’s even more!  So grab a note pad and listen in as The Real Estate Guys™ interview CPA Tom Wheelwright.

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed.

12/19/10: Winding Down the Year – Maximizing Your Properties, Deductions and Strategies

Let’s face it.  Running even a fledgling real estate empire is hard work.  The only paperwork that’s fun is cashing those rent checks!  Nonetheless, the end of the year is a great time to step back from all the wheeling and dealing and do some strategic planning for the New Year.

In The E-Myth Revisited (on our list of Recommended Reading), author Michael Gerber says you must invest time “working ON your business instead of IN it”.  In Before You Quit Your Job (hey! that’s also on the recommended list!), our good friend Rich Dad Poor Dad (yes, it’s on the list too) author Robert Kiyosaki explains the importance of SYSTEMS in his B-I (Business Owner / Investor) Triangle.  The point is that being organized and thinking strategically are critical components of success.

But where to start?  That’s the topic of this episode!

Behind the microphones, in the Equity Sleigh, winding down the year:

  • Your host, the Santa of Real Estate Wisdom, ho-ho-host Robert Helms
  • Santa’s Helper, co-ho-ho-host (or just “co-ho” for short), Russell Gray
  • Our own Santa look-alike, the Godfather of Real Estate, Bob Helms

Taking a page from Santa’s playbook, The Real Estate Guys are making a list and checking it twice.  But we’re not looking for who’s naughty or nice…well, actually naughty would be okay 😉  …our list has a bunch of things real estate investors should be thinking about this time of year.

When rushing to open your holiday gifts, wouldn’t it be nice to open up a great big tax deduction, reduced mortgage rate or increased cash flow?  Of course it would!  But sadly, no one is going to slide down your chimney and stuff your stocking with enhanced profits.  So, if you want to pad your bottom line, and keep your assets safe and warm, you’re going to have to wrap your own gifts.

So grab a pen and paper (or that brand new iPad you just opened) and get ready to take some notes.  When you’re done listening to this episode, you’ll have very own end of year checklist and a great start of a new holiday tradition!

Happy Holidays!

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