Dr. Jim White, PHT Investment Group

There appears to be a turning of the tide on the horizon. Runaway inflation is now a primary concern for investors, along with a host of other financial threats. An increase to the capital gains tax rate from a top rate of 23.8% to 39.6% is looking like a very real possibility, as are potentially higher income tax rates, both of which can stymie new investment in the private sector.

One of the bright spots is the emergence of Qualified Opportunity Zones (QOZs), where opportunity still abounds for beleaguered investors facing capital gains taxes from the sale of business interests, equities, real estate, and other highly appreciated assets.

Opportunity Zones offer investors that pay U.S. taxes certain tax benefits for rolling over their realized capital gains into an equity investment in Qualified Opportunity Funds (QOFs) – special, privately organized funds that invest in these low-income areas.

There are now more than 8,760 designated QOZs and over 1,002 QOFs in the United States and its territories, providing an abundance of opportunity for investors in OZ funds such as PHT Opportunity Fund.

Along with the growing interest in ESG investing this year, QOFs remain attractive to many because of the social impact they can provide, the higher ROI, and of course, the significant tax breaks they offer compared to traditional ESG funds.

Mark 12/31/2021 On Your Calendar

Investors in QOFs receive three major benefits: a temporary tax deferral, up to 10% tax reduction, and full tax exemption on any new gains from the QOF investment.

In other words, an investor with capital gains can defer paying taxes until April 2027 if they reinvest those gains into a QOF. In addition, if the OZ investment is made on or before December 31, 2021 and is held for 5 years, the taxes owed on those deferred gains is reduced by 10%. 

This is essentially a 5-year, interest free loan from the government, in addition to a 10% tax reduction on those deferred capital gains – tax breaks which are very attractive to investors. 

However, the most powerful aspect of the Opportunity Zone program is the full tax exemption. Holding the QOF investment for 10 years eliminates 100% of the federal taxes due, saving an investor at least 23%, and potentially up to 40% in taxes. And with the likelihood of higher tax rates in the future, this exemption provides a powerful incentive for investors today.

“Even if the rate’s higher, you likely can be better off investing in an opportunity zone than paying taxes and those dollars going away forever.”

Dr. Jim White, PHT Opportunity Fund LP

PHT Opportunity Fund LP

PHT Opportunity Fund is helping investors capitalize on significant tax advantages by providing advice and direct access to an experienced team. Each investor receives a customized approach to meet their financial objectives, while helping drive positive change in underserved communities.

Contact PHT Opportunity Fund online or by calling Jake Levison at (203) 610-9399 to learn more about us and our offerings.