Opportunity Zone Benefits for Small Businesses and Startups
Tuesday, June 28th, 2022
The Opportunity Zone Act of 2019, known as H.R. 6774, has been signed into law by President Donald Trump. The new legislation establishes a new type of federal tax incentive program for certain areas within the United States called “Opportunity Zones.”
These zones are intended to encourage economic development and investment in low-income communities with high unemployment rates by giving investors a temporary deferral from capital gains taxes when they sell stocks or other assets that have appreciated in value over the past decade.
See Below how we can help with
entering an Opportunity Zone
There has been some confusion surrounding these tax incentives since they were introduced, but here is what you need to know about opportunity zones if you own a small business or are considering starting one:
What is an Opportunity Zone?
An opportunity zone is a designated area in the United States that has been identified by the U.S. Treasury Department as eligible for significant tax incentives.
The purpose of opportunity zones is to encourage investment in areas struggling with poverty and low economic growth, thus generating more jobs and wealth creation as a result of private-sector investment.
As such, businesses within an opportunity zone may be eligible for special tax breaks—including income deferral, capital gains tax deferral, or partial exclusion—with potential savings of up to $2 million per year on top of state-level benefits that can be claimed on federal taxes (e.g., deductions for depreciable assets).
Who Qualifies for Opportunity Zone Benefits?
Anyone who is a small business owner or startup owner may be eligible for the Opportunity Zone benefits.
How to Qualify for Opportunity Zone Incentives
The first step to taking advantage of the opportunity zone benefits is to do your research. If you or your business qualify for opportunity zone incentives, you can save yourself money on taxes by investing in a qualified opportunity fund.
To find out if you qualify, speak with an accountant or tax attorney who can help you understand what kind of investments make sense for your situation.
Opportunity Zone Incentives for Your Business
What are the benefits of Opportunity Zones?
The program offers a tax rebate of up to $1.5 million for investors who hold property in an Opportunity Zone for at least five years and meet certain criteria, such as being a qualified business owner or investing in a qualified business.
- You can defer capital gains taxes on any sale of an opportunity zone investment through Dec. 31 2026.
- You can defer income taxes on any gain you earn from selling or taking out equity from an opportunity zone investment through Dec. 31 2026.*
The benefits of opportunity zones are significant for small businesses and startups.
It’s not just the tax incentives that make opportunity zones a great choice for small businesses and startups. If you’re thinking about investing in an opportunity zone, here are some of the other benefits you can expect:
- Corporations have incentives for working with Startups located in an Opportunity Zone. Even if it doesn’t translate into a big tax saving, startups should still register into opportunity zones to maximize their success ratio. Being located in an Opportunity Zone provide great leverage during a sales conversation.
- Is your business applying for a grant? Check if being registered in an Opportunity Zone provides you with the highest chances of receiving that grant.
- Opportunity zones are a way to invest in distressed communities. Many small business owners want to be involved in their local community but don’t know how they can do so directly. One way is by investing in an opportunity zone fund—but another is by purchasing real estate property within an eligible area! By purchasing affordable housing or commercial property (such as vacant lots on which new buildings could be constructed), you’ll be able to have a direct impact on the health of your own neighborhood or community without having to commit time or money beyond what’s necessary for maintenance costs each month (if applicable).
- Opportunity zones encourage entrepreneurship because they offer tax breaks designed specifically for small businesses and startups whose owners need every advantage possible when it comes time for them to compete against larger companies whose revenues come from multiple sources instead of just one product line like yours does—or if yours happens not even have any products yet since perhaps all your focus has been put towards developing them first before making any profit off sales.
If you’re a small business owner, the benefits of opportunity zones are significant. With the right incentives, you can increase your profits and expand your business. You can also benefit from these incentives if you decide to sell your company in the future. We hope this article has given you some insight into how opportunity zones can help businesses succeed and grow in today’s market!