Tax Credits and Opportunity Zones: Can be Combined?

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Can Tax Credits and Opportunity Zones Be Combined?

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SUMMARY: Low-income neighborhoods have received government boosts through the opportunity fund program and tax credits. Investing in opportunity zones through real estate projects positions you to qualify for credits, such as the low-income housing tax credit (LIHTC). Low-income neighborhoods have long suffered from development efforts in favor of more up-scale regions across the US. The opportunity fund was enacted through the Tax Cuts and Jobs Act to overcome these challenges and divert meaningful resources towards places designated as opportunity zones and in projects such as real estate. These same regions are eligible for more government incentives such as tax credits that allow investors benefits for channeling funds towards these areas. Investors then wonder, and inevitably so, whether it is possible to combine these incentives and whether they lead to greater overall benefit. Opportunity Zones OZ are regions identified as low-income by the US government and need economic development. Their characteristics include low household income, low education, higher unemployment, higher poverty levels, and greater negative externalities such as crime. These neighborhoods' demographics mostly consist of minority groups and people of color. To qualify for the fund, you must invest at least 90% of the entity's assets in an opportunity zone. You must file an annual partnership or corporation federal income tax return and submit the IRS Form 8896.


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