Benefits and Risks
QOFs, which are development funds, may have greater potential for appreciation than other buy-and-hold real estate investments. However, QOFs require a long-term commitment and involve market risks tied to the economic performance of the designated zones. There may be little or no income generated by the fund for several years, and real estate development presents a much higher risk of capital than more conservative buy- and-hold real estate strategies. Investors should carefully evaluate fund structures, project feasibility, and regulatory compliance before investing in a QOF. Consulting a financial advisor like 1031 Capital Solutions and a tax professional is highly recommended.
QOZ Tax Law Updates
As of March 2025, the tax deferral provisions under the Qualified Opportunity Zone (QOZ) programs are legislatively set to expire on December 31, 2026. This means that taxpayers who have invested in QOFs are required to recognize their deferred capital gains as taxable income by that date. In recent years, bipartisan efforts have been made to extend these tax incentives. Notably, legislation was introduced in the 117th Congress to prolong the deferral period, but it did not advance. The proposal was reintroduced in the 118th Congress, which is currently in session, but as of now, it remains pending without enactment. Given the current legislative landscape, the likelihood of Congress extending the QOZ tax deferral provisions beyond 2026 is uncertain. While there is ongoing discussion and some legislative proposals aiming to extend these benefits, no definitive action has been taken to date. Investors should stay informed about legislative developments and consult with tax professionals to navigate potential changes to the QOZ program. Click here to watch a webinar about Qualified Opportunity Zones.
QUALIFIED OPPORTUNITY ZONES MAY HAVE GREATER POTENTIAL FOR APPRECIATION.
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