The Federal Qualified Opportunity Zones program has turned South Florida into an even more interesting area for real estate investors. Aiming to incentive private investors, significant tax deferral opportunities are available all over the place in used-to-be economically disadvantaged areas that have already been revitalized.
There are 123 opportunity zones, 67 just in Miami Dade, 56 between Broward and Palm Beach counties. That has allowed almost currently 16% of commercial assets to be located there. As we said before, most of the zones included in the program are already economically and commercially recovered, we are talking of neighborhoods like Miami’s Wynwood and Overtown. Another opportunity zones, that were already pointed out by investors prior to becoming part of the program are North Miami, Coconut Grove, Allapattah and some neighborhoods placed near Fort Lauderdale and West Palm Beach. But, how is that opportunity zones work?
The basics of the Opportunity Zone Program
- There are three kinds of tax incentives offered within the Opportunity Zone Program:
- Deferral of capital gains invested until December 31, 2026.
- Reduction of capital gains invested, leading to a 15 percent reduction in capital gains tax.
- Exclusion of gain on QOZ property held for at least 10 years.
- It’s not for every kind of investor. In order to access the tax deferral benefits you must prove gains from the sale of an asset.
- The buyer needs to keep the property for, ideally, ten years (capital gains are tax-free at this point). At least they must hold it for five years (capital gains drop by 10%). The longer they keep the asset, the more they benefit. The goal of the program is to incentive long-term acquisitions, to economically change for better the community around.
- Not only residential investors can be granted the benefits of the program, but also commercial ones. Multifamily rentals, office spaces, retail are the ones that currently more interested in these opportunities. Of course they have to meet some basic requirements to qualify, like:
- To provide at least half of the services within the area.
- Make sure their workers spend at least half of their time in the area.
- Business operation and management are based in the zone.
To qualify for the program, traditional limits on the kind of property or business investment are not so strict this time.
Now that we know the basics, we start thinking, which is the best opportunity zone to invest then?
Our highlighted opportunity zones
- West Palm Beach
- Boynton Beach
- Delray Beach
- Pompano Beach
- Fort Lauderdale
Tax benefits are already generating value-building investments, bringing new jobs and business into the areas. This is really good news, both to investors and to existing local communities. Identifying resources and tools to help your real estate clients investing better and profiting more is part of your job as a realtor. Contact us if you want to partner and offer them not only your knowledge but also financing for their real estate investments.