Now if you're a real estate investor you probably already heard about the empowerment zone tax incentive
If not, you've got to get up to speed. These are pretty cool
Now what Congress and President Trump did back with the tax cuts and Jobs Act that huge legislation passed at the end of 2017
They empowered the Treasury Department to create
4700
Zones areas that really needed some economic boosting and they worked with the governor's to identify these areas
Now the government's pretty crappy of going in improving areas
So what they decided is we're gonna create some cool tax incentives to encourage real-estate
Investors to go into these areas and buy properties and improve them. It's gonna hopefully make our country a better place
Well, I've got five strategies you need to know about in regards to this legislation. That could really help boost your bottom line and
Help make America better again. Did I really say that? Okay, let's get into it
Number one you get to defer the gain on the sale of a property when you invest one of these opportunities owns
Think of it like a 1031 exchange some you might be familiar with this
You sell a property you buy a new one of equal or greater value
You don't pay the tax you defer the gain until you sell the second property
You can sell three and buy one sell one and buy three or more. I've got other videos on YouTube on
1031 exchanges well the opportunity zone works like this only it's better
You don't have to buy a new property of equal or greater value. All you have to do is invest the gain
so let's say you sell a property for 200 grand but the gain was
$50,000 you bought it for 150 you sold it for 200 keeping it simple. So all you have to do is invest the
$50,000 in the opportunity zone and you don't pay any tax you can defer the game
Number two, you can take any capital gain and use it in this strategy. That's right. You could sell stock in
Your portfolio in Wall Street for lack of a better word and you've got this capital gain from the sale of stock
which under a 1031 exchange you could never turn around and just put it in real estate and
Exclude the gain but here you can so let's say you sold that
$200,000 worth of stock and you have a $50,000 gain again
well, all you have to do is invest that 50,000 in an opportunities own property and
No tax you get to defer that on even a stock game number three it even gets better. The gain is reduced
over time so the longer you hold the property the gain is reduced as
An incentive for you to keep that property and maintain it and make that area better, right?
This is the opportunity zone. Now. This is where it gets complicated - down in the information below
We are law firms produce three different articles part 1 2 3 on the opportunity's own
Please click on those articles to read more and get more of the details
now as many of you know
I'm a CPA an attorney and a partner in a law firm an accounting firm and we help clients all over the country with their
Tax and legal strategies when it comes to real estate or small business in general. So I'm hoping that this
You know video here my open
Door for you learning more about the services we provide because we love this stuff and we want to help you
Succeed better and you're investing now back to the point here. The gain is reduced over time
So what that means is?
If you hold the property at least five years the gain is reduced by ten percent
So you took that fifty thousand dollars you bought into an opportunity zone now, the gain goes down by ten percent
That's five thousand dollars. So the taxable gain is now forty five thousand dollars. Boom
Now if you hold it at least seven years the gain is reduced by another five percent
so now 15 percent of that gain is
Excluded forever you just got a reduction in the capital gain. So what this means is by
2026
You've got to pay the tax if you hold it at least those seven years
By 2026 you actually pay the tax at that point. So your gain is deferred
Not until you sell the property. It's up until 2026 you hold it that long
The gain is reduced by 15 percent and then you would claim the gain on your tax return for your twenty. Twenty six
Probably filing it by April of 2017. So
2027 sorry, like I said a little complicated you're going to read up a little bit, but this is pretty cool
Again, that gain is excluded number four it even gets better
I probably should throw in some Ginsu knives right some of you're too young to know what that means
But so you might appreciate that anyway, so here's how it gets better
There is a complete
exclusion on
Appreciation from taxes. Okay, let me explain
If you hold the property at least ten years and then sell the property under this legislation
You paid no tax on the appreciation from the date. You bought the opposition opportunities own property
You hold it ten years if the property went up another hundred grand you pay zero tax on any
Appreciation if you hold it at least ten years
What right pretty cool so in?
2026 you get to exclude your gain you claim your capital gain
You got a deferral and a reduction you hold it three more years for at least ten years and then you decide to sell it
Any appreciation on the increase in value?
Tax-free, oh
Pretty cool. Now number five strategy and this is important to highlight even in this opportunity zone strategy
Make sure you implement your LLC your limited liability company in the strategy
It's not gonna screw up the opportunity zones incentive
It's not gonna create a due on sale clause with any mortgage
Soon as you buy this property in the opportunity zone get it in an LLC. These are tending to be of course dilapidated areas
You're gonna Gary create great cash flow, but you got to be careful
This could be an asset protection issue that you've got to take
Seriously, make sure you get that property in an LLC and folks do your company maintenance. This just isn't one form the state
Oh, it was $50. So I'm good to go
Those LLC's are getting pierced more and more with lawsuits around the country because people aren't doing their minutes
They're not maintaining an operating agreement a separate checking. We have a company maintenance program at our office
it's only 150 bucks a year to do all these pieces and parts to make sure your LLC is solid and
Also, this is not just a one click on LegalZoom
Please if you have any questions on this
Our law firm sets up any LLC in any state for 800 bucks and you get a consultation with real tax lawyer for an hour
Tailoring it to your plan. So get the LLC in place. It makes your
Incentive even better because you're protecting yourself from the legal side while you're also getting the tax benefits
So you get the whole package?
In summary. I'm a firm believer in
Diversifying all of these strategies to get to your path to financial freedom
it's exciting real estate should be a part of your equation just like some Wall Street pieces and parts and
Insurance and your own home and your a business. I want you to have a well diversified
portfolio of investments in an outside of Wall Street
They're gonna help you better live your American dream. Now this opportunity zone is something could be a huge help in that process
Thanks so much for watching that video and I want to be your source for tax and legal strategies
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Marjory Kohler comm with all sorts of videos probably 70 plus videos 30 plus hours of content that'll save you thousands