The federal government is using the tax code to incentivize development in “opportunity zones,” economically distressed communities where new investments can receive preferential tax treatment. The incentives were quietly inserted into last year’s tax-reform bill. Treasury Secretary Steven Mnuchin recently predicted they could prompt $100 billion in private investment to low-income communities.
Anyone who makes a qualified investment in an opportunity zone can defer capital-gains from an unrelated investment, whether it’s from the sale of other real estate or cashing out a big gain on a tech stock. What’s more, any gains realized on a zone investment are tax-exempt if they are held for at least 10 years.