If you don’t understand what Opportunity Zones are, how they work, or just want to learn more…
TLDR:
OZ’s let you defer capital gains taxes for 5 years (erasing 10% of the gain), then make all post-investment growth completely tax-free after 10 years by reinvesting in designated real estate.
Read this for more details 👇
Barrett Linburg (@DallasAptGP)
Sell appreciated stock.
Defer the tax 5 years.
Erase 10% of the gain.
Pay zero federal tax on the growth after year 10.
Sounds like a loophole. It isn't. Congress built it on purpose and made it permanent.
One thing up front: the full version of this deal starts January 1, 2027. Sell stock now and your reinvestment window reaches past that date. More on that at the end.
Here's how it works, in plain English.
Say you sell stock and make a $500,000 profit.
At the top federal rate, roughly $120,000 of that is headed to the IRS.
But the tax code gives you another option. Take the $500,000 and invest it in real estate in certain neighborhoods within 180 days. The government publishes a map of which ones. They're called Opportunity Zones.
Do that inside your 180-day window and three things happen.
The $120,000 stays invested. The bill waits five years.
When the bill comes due, it shrinks. Hold five years and you pay tax on 90% of the original profit.
Then the big one. Hold ten years, then sell. The growth is tax free. Turn $500,000 into $1.5 million and the $1 million gain escapes federal tax. Forever.
You already know an account that works like this.
A Roth IRA. Money goes in, grows for years, comes out with zero tax on the growth.
An Opportunity Zone investment is a Roth IRA for your capital gains. With three upgrades.
No contribution limit. A Roth caps you at $7,500 a year. Here you can put in $500,000 or $50 million.
No income limit. The IRS phases out Roth contributions for high earners. This has no income cap at all.
No waiting until 59½. The clock is ten years, whatever your age.
And unlike money locked inside a retirement account, this investment can pay you along the way.
A new apartment building throws off big depreciation deductions. Those deductions shelter the rent income the building sends you. The cash flow checks arrive. Most of the tax bill doesn't.
Normal real estate has a catch here. The IRS collects that depreciation back when you sell. Hold an Opportunity Zone deal the full ten years and that recapture bill never comes.
Money can come back a third way. Once the building is leased, the deal can refinance and return part of your capital in the middle years while the ten-year clock keeps running. Done wrong, an early payout can break the tax benefits. This is where a CPA who knows the program earns the fee.
Now the part almost nobody knows.
You don't open this account at Fidelity. You don't need a Wall Street fund. Although there are many "big fund" options.
You can create the fund yourself.
It's an LLC taxed as a partnership. It files with the IRS every year and has to keep 90% of its money in qualifying projects. A CPA who knows the program can have yours running in a few weeks.
Just like your Roth, the fund is only the wrapper. You decide what goes inside.
That's why control matters. You pick the deals. You can split one $500,000 gain across three sponsors. An apartment builder in Dallas. A self-storage operator in Phoenix. An industrial deal in Ohio. Different operators, different cities, different asset types, one tax treatment.
You would never put your whole portfolio in one stock. Your capital gains deserve the same treatment.
One requirement makes the splitting work: the sponsor has to structure for it. Your personal fund can't invest in someone else's fund, so it has to plug in at the project level.
That's how we build.
Every apartment project we do in Texas is structured so investor funds connect straight to the building. Your fund, our project.
Our largest project has 19 separate funds invested in it. Most were created by the investors themselves. Each one holds a profit that found a home in Dallas instead of the IRS.
One warning. The tax break doesn't turn a bad development into a good one. Judge the real estate first. The tax treatment is the bonus, never the reason.
Now the timing.
A new map takes effect January 1, 2027 and lasts ten years. States are picking their tracts right now.
The five-year deferral and the 10% haircut apply to money invested starting January 1, 2027.
So here's the play. A gain realized in August carries a 180-day window that reaches into 2027. Realize the gain now. Watch the new map drop. Invest after January 1 and catch the full benefits on day one of a ten-year cycle.
Most people will hear about the new map in 2028.
You just heard about it today.
— https://nitter.net/DallasAptGP/status/2084698152737628409#m