What is an Opportunity Zone in Los Angeles?

An Opportunity Zone is a struggling area where new investments can get special tax benefits. If a state picks an area as an Opportunity Zone and the U.S. Treasury agrees, it gets this status through the Internal Revenue Service.

Tax Incentives for Opportunity-Zoned Areas in Los Angeles

Get Tax Savings by Investing in Communities That Need Help. The Investing in Opportunity Act, passed in December 2017, aims to get more people to invest in low-income areas by offering tax breaks. This means if you invest money, you've made from selling property or other investments into Opportunity Funds; you can save on taxes. These funds are used in Opportunity Zones, areas that need these investments.

Opportunity Fund in Los Angeles

An Opportunity Fund is a special kind of investment group that puts money into areas called Opportunity Zones. These are places that need more investment to grow. The fund has to use at least 90% of its money in these zones. If you keep your money in the fund for at least 5 years, you get a 10% tax break on the profits you made when you first put in your money. If you wait 7 years, this tax break goes up to 15%. And if you can keep it there for 10 years, you get the 15% break on your initial profits and don't have to pay taxes on any more money you make from that investment. The more you wait, the more you can benefit.

Putting it in an Opportunity Fund could be wise if you're a patient investor with extra money from profits.

The Good Things About Opportunity Zones for Neighborhoods

Past projects did not help communities fairly or in the best way. By bringing new investments to these areas, we can improve things that the community needs. This can help the local economy grow and create more jobs.

• Tax Benefits: Investors get special tax breaks when reinvesting their earnings into designated Opportunity Zones. This includes delaying or avoiding capital gains taxes if the investment lasts 10 years or more. Investors can defer and reduce taxes on previous gains by investing in Opportunity Funds. If the investment is held for 5 to 7 years, part of the tax is forgiven, and if held for over 10 years, the increase in investment value is not taxed.

• Enhanced Investment Value: Investments in these zones may increase in value up to the current market rate, potentially reducing the amount of federal capital gains taxes owed.

• Community Revitalization: Putting money into these zones spurs community development and job creation in areas that need it most, improving the quality of life for residents.

• Versatile Investment Options: The program allows for various investments, including residential and commercial real estate, as well as new business ventures, with no cap on the benefits.

• Economic Growth: Opportunity Zones stimulate economic growth by providing attractive tax incentives to investors who channel their funds into businesses within these designated areas. This influx of investment capital is critical in revitalizing underdeveloped neighborhoods, fostering job creation, and stimulating local economies. By incentivizing investment in these zones, not only are investors given a chance to grow their wealth, but communities also benefit from improved infrastructure, increased employment opportunities, and a boosted local economy. This creates a win-win scenario where investors and community members see tangible benefits, leading to a more vibrant and sustainable economic landscape.

• Beautification and Clean-Up: Investments can also enhance the area's physical appearance, making it more attractive and welcoming.

• Expanding Housing and Business Opportunities: By investing in these zones, there’s an opportunity to create more housing and business spaces, meet the community's needs, and foster economic growth.

Do you have to live in an Opportunity Zone to get these tax breaks?

No, you don't. You can still get these tax benefits even if you don't live, work, or own a business in an Opportunity Zone. You need to invest some money you've earned from another investment into an Opportunity Fund and choose to wait to pay taxes on that money.

How Do You Determine Opportunity Zone?

A neighborhood must fit specific rules to become an Opportunity Zone in Los Angeles. These rules were set up in 2017 when the Tax Cuts and Jobs Act was passed. There are 193 of these special zones in 13 areas of Los Angeles. To qualify, a neighborhood must be where many people live in poverty, or the average family doesn't earn much. In Los Angeles, several Opportunity Zones are strategically located in critical areas, including parts of Culver City, a segment of Korea-town, and regions south of the 10 Freeway near and out of downtown. Downtown, all designated for development opportunities.

To get Opportunity Zone funding in Los Angeles, a neighborhood must meet these rules:

• Must be a Low-Income Area: The neighborhood needs to be where not many people have a lot of money. This is usually shown by at least 20% of people living in poverty or the average family earning less than 80% of what most families make.

• State and Federal Approval: The neighborhood must be chosen by the state and approved by the U.S. Department of the Treasury.

• Limited Number of Choices: Each state can only choose a certain number of neighborhoods for this. They can pick at least 25, but not more than 25% of all the communities that could qualify.

• Nearby Areas Can Qualify Too: Up to 5% of the neighborhoods next to an existing Opportunity Zone can also be chosen if they meet specific income rules.

In short, for a neighborhood in Los Angeles to get this funding, it must be a low-income area and officially selected and approved.

Are you home in the opportunity zone?

You can find out here: Opportunity zone map.

Discover the Value of Your Property in an Opportunity Zone in Los Angeles: A Key to Maximizing Your Investment

Locating in an Opportunity Zone isn't just a feature – it's a significant selling point that substantially increases your property's value. This is why partnering with a knowledgeable real estate agent is crucial. The right agent understands the unique benefits of these zones and can effectively leverage this knowledge to enhance your property's market appeal. Choose an expert who can unlock the full potential of your investment and turn this opportunity into a decisive marketing advantage.

Are you in the Los Angeles area and considering selling your investment property or land? Are you thinking about downsizing your real estate portfolio? Let us guide you to success. Contact us today for a complimentary consultation and discover how our expert insights and tailored strategies can maximize the value of your real estate investments. Take advantage of this opportunity to turn your property assets into profitable ventures. Who you work with matters.