The opportunity zone program was created by the Tax Cuts and Jobs Act of 2017 to revive economically distressed communities using private investments.
What are Qualified Opportunity Zones?
The opportunity zone program is intended to stimulate positive growth in certain communities. So there are restrictions on the investments which an Opportunity Fund can invest. These types of investments are called “Qualified Opportunity Zone Properties,” which are:
How investing in opportunity zones works
In exchange for investing in opportunity zones, investors can defer their capital gain taxes till 2026. In addition, investors who hold their investments for at least five years before December 31st, 2026 are entitled to a 10% reduction in their capital gains tax basis. Investors who keep their investment for at least seven years are entitled to a 15% reduction in their capital tax basis. Investors who hold their investment for at least ten years will not have to pay any capital gains taxes.
To access these benefits, investors must invest in Opportunity zones through Opportunity Funds; which are investment vehicles created to take advantage of the opportunity zones program. Opportunity funds must keep their assets in a Qualified Opportunity Zone (QOZ). Opportunity funds can also self-certify to the IRS and do not need any approval from anybody.
The Best Opportunity Zones in California
California has lots of Opportunity Zones with opportunities to invest. While major Opportunity Zones in California are located far inland, there are several Opportunity Zones in places like San Francisco and Los Angeles.
San Francisco Bay Area: Cupertino, San Jose, and Oakland
Cupertino, Oakland, and San Jose are hosts to multiple Qualified Opportunity Zones. Oakland is a promising investment area, as home values have gone from $309,000 to $734,000 over the last nine years. Much like San Jose, home values have also gone up in seven years, from $487,000 to $1.07 million from 2012 to 2019. The increase in home values has made the market enticing for Opportunity Fund Investors.
Los Angeles: Koreatown, DTLA, and The Arts District
The LA Arts District and Downtown LA (DTLA) is one of the fastest-growing urban areas in Los Angeles. Much of Downtown LA is located within Opportunity Zones, providing enticing opportunities for investors. Koreatown is another fast-growing area in Los Angeles. In 7 years, real estate prices in Koreatown went from $333,000 to $637,000, almost double their initial cost.
Benefits of Opportunity Zone Programs
The main benefits of Opportunity Zone programs are projects and businesses in the zones are eligible for investments, and investors are eligible for tax benefits in exchange for investing in projects in the Zone. More benefits of the Opportunity Zone Program include:
For Businesses and Projects in the Zone:
Orange County, California has 27 designated Opportunity Zones. In total these Opportunity Zones have a population of approximately 170,000. That represents 5% of the county’s total population of 3,200,000.
The median household income for Orange County Opportunity Zones ranges from approximately $39,000 to $65,000.
The adjacent map shows all Opportunity Zones in Orange County. Click on any Opportunity Zone for additional information. Read more here...