With the recent introduction of proposed rules governing the application of “opportunity zones,” developers are better equipped to take advantage of this attractive tax strategy. Here’s a recent article about its use in Philadelphia.
Philadelphia is in store for its first smattering of construction projects funded by investors who want to cash in on a provision in the 2017 tax bill meant to encourage development in low-income communities.
At least five projects across the city — in Brewerytown, Francisville, Germantown, and Kensington — are soon to break ground with the backing of groups that plan to use the developments’ location inside so-called opportunity zones to claim potentially big savings on what they owe the IRS.
Coming more than a year after President Donald Trump signed his tax bill into law, the projects represent a modest start toward what his administration has said could equate to more than $100 billion in investment into disadvantaged communities nationwide.
Under the 2017 legislation, people and companies owing tax on investment income can put off paying those levies for up to seven years by directing the earnings into real estate ventures or other businesses set up in low-income areas designated as opportunity zones.
Investors also qualify for reductions of those deferred taxes if they keep their money parked in the ventures long enough, with the biggest breaks going to those who stay invested for the full seven years.
And once 10 years pass, investors can sell their stakes in opportunity zone projects or businesses without being taxed at all on gains from that transaction.
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