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  • By Jeremias Ramos, CPA, Withum

Top 5 takeaways: 2nd round of QOZ Proposed Regulations

The Internal Revenue Service recently issued more proposed regulations (REG-120186-18) on Sec. 1400Z-2, which outline the new tax incentives for investing in economically distressed communities. For a quick overview, the tax incentives within Sec. 1400Z-2 allow taxpayers to defer a realized capital gain for as long as seven years if they subsequently invest the capital gain into a Qualified Opportunity Fund (QOF) within 180 days. If the taxpayers hold that qualified interest in said fund for five years, they will be allowed to take a 10% discount off of the original capital gain. If the taxpayers hold the qualified interest for an additional two years, they will be given an additional 5% discount on their original capital gain. Fast forward to December 31, 2026 and the taxpayers will only have to pay tax on 85% of their original capital gain that was realized seven years earlier.

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