Benefits of Investing in QOFs
Defer paying capital gains tax until December 31st, 2026 according to the current Tax Reform in 2017.
Reduce tax payment by 10% if the capital gains are held in a QOF for 5 years. (by 15% if held for 7 years).
Pay zero capital gains taxes on your QOF investment profit (if held for at least 10-years), while still paying 15% less of your original investment capital gains tax.
Extreme Effects on ROI and Equity Multiple
- $1,000,000 capital gains are invested in QOF and held for 10 years
- 15% of 1M is abated => pay capital gains tax on $850,000 (includes highest federal gains rates of 20%, with a 3.8% net investment income tax) by December 31, 2026.
- Any amortization on the property as well as sale or exchange gain is not taxable.
In the chart above, after tax return of 1.9 multiple is equivalent to a non-QOZ investment earning net multiple of 2.49 once taxes are considered. In other words, to make the same amount of after-tax revenue of $1,802,815.00, investor will have to earn a 2.49 net multiple, after taxes, on a non QOZ investment.