8 | April, 2020 |Malik JavedRyan VanderVelden, Accounting Today.

Opportunity zones and cost segregation

Opportunity zones are garnering increased interest across the country. Taxpayers who meet the requirements for investing in an opportunity zone can potentially take advantage of increased depreciation deductions through cost segregation, further decreasing their tax liability.

There is an opportunity to take advantage of cost segregation for certain taxpayers who have invested in qualified opportunity funds. The opportunity zone program was enacted by the Tax Cuts and Jobs Act in December 2017. Under the requirements of the TCJA, investors who wish to develop in economically distressed communities (designated as opportunity zones) do so through an investment vehicle called a qualified opportunity fund. A qualified opportunity fund is funded using capital gains and is required to be organized as an entity taxable as a corporation or a partnership for the purpose of investing specifically in qualified opportunity zone property. There are three tax incentives for reinvesting capital gains in a qualified opportunity fund:

1. Recognition of capital gains are deferred until the qualified opportunity fund is sold or exchanged, or Dec. 31, 2026, whichever occurs earliest. Read more…