What Are the Opportunity Zones in Nevada?

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Someone looking to invest in commercial real estate may be concerned with the tax implications of making such an investment. Are there areas where investments can be made and taxes will not cause more financial loss than gain? And if the investor is socially conscious, is there a way to invest that could help revitalize disadvantaged areas of their local community? Qualified Opportunity Zones (QOZs) can help investors with both of these questions.

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What Are Opportunity Zones?

OZs were created by the Opportunity Zone program, a tax incentive plan initiated to promote private investments into low-income communities. The program was established by the Tax Cuts and Jobs Act of 2017, major tax legislation that was enacted by the US government. OZs are formed when a state nominates any of its low-income sections that have been identified by census area or tract. The nominated areas are reviewed, certified, and approved by the Secretary of the US Treasury and the Internal Revenue Service (IRS).

Qualified Opportunity Zones have been identified across the US in every state through census information. QOZs appear in all types of settings: urban, suburban, industrial and rural. To assist the lower-income populations in these QOZs, investors can put their money into real estate or businesses to help spur economic development.

How Do Opportunity Zones Work?

With OZs, private money is used to revitalize economically distressed neighborhoods rather than taxpayer dollars. Organizations or individuals with capital gains can qualify to invest, and anyone who participates is eligible to benefit from capital gains tax incentives.

To participate in an OZ, a potential investor files a Form 8896 with the IRS to create a Qualified Opportunity Fund (QOF) that can be used to finance housing, infrastructure, existing or new businesses or commercial or industrial real estate. If investing in real estate in an OZ, one requirement is that the properties must be “substantially improved” with the money invested.

Bonuses of investing in OZs include the following:

  • Taxes can be deferred on any capital gains put into their QOF until the investment is sold or exchanged, or December 31, 2026, whichever comes first.
  • If an investor keeps their capital gains in a QOF for at least 5 years, their original investment can increase by 10%.
  • If left in the fund for at least 7 years, the investment increases by 15%.
  • Unlike tax credit programs, there is no limit on how many QOFs can exist.

One of the markets that has benefited from OZs is commercial real estate. Real estate is typically a long-term investment, so it fits well with the OZ Program where your base investment will reap the most growth over a long period of time. Another reason OZs are important to commercial real estate is that they pair perfectly with the fundamental strategy of buying property at a low cost in emerging areas. The potential for appreciation of real estate in growing and improving OZs make this program a win for commercial real estate investors.

What Are the Opportunity Zones in Nevada?

In Nevada, there are sixty-one areas that are officially designated Qualified Opportunity Zones. As of November 2019, these areas include areas in the following counties:

  • Clark
  • Carson City
  • Churchill
  • Elko
  • Lyon
  • Storey
  • Washoe

Every state in the US has low-income areas that need help to rebound and rebuild. Opportunity Zones and the tax benefits that come with investing in them are a great way to turn these impoverished neighborhoods around, while giving individuals and businesses with capital gains an impressive tool to grow their investments.

Graham Team 2019 Market Report

Gidget Graham

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