--- title: A Brief Overview of Opportunity Zones - Chicagoland 1031 Exchange description: 1031 Exchanges and qualified opportunity zone funds have similar benefits, promising investors can defer potential capital gains taxes made on an investment property; however, OZs cover both commercial and residential investments. image: https://blog.chicagoland1031exchange.com/hubfs/OZ%20Chicagoland.jpg --- [![logo-black-mobile](https://blog.chicagoland1031exchange.com/hs-fs/hubfs/logo-black-mobile.png?width=261&height=90&name=logo-black-mobile.png "logo-black-mobile")](https://chicagoland1031exchange.com/) [![logo-black](https://blog.chicagoland1031exchange.com/hs-fs/hubfs/logo-black.png?width=261&height=90&name=logo-black.png "logo-black")](https://chicagoland1031exchange.com/) [![brokercheck-white](https://chicagoland1031exchange.com/wp-content/uploads/2019/07/iconfinder_phone-call_2561306.png)(224) 245-5281](tel:224-245-5281) - [Default HubSpot Blog](https://blog.chicagoland1031exchange.com/insights-events) - [Section 1031 Exchange](https://chicagoland1031exchange.com/1031-exchange-program/) - [1031 Exchange](https://chicagoland1031exchange.com/1031-exchange-program/1031-exchange/) - [DST 1031 Exchange](https://chicagoland1031exchange.com/1031-exchange-program/dst-1031-exchange/) - [Available 1031 Properties](https://invest.chicagoland1031exchange.com/1031-exchange-properties) - [Resources](https://chicagoland1031exchange.com/1031-exchange-information/) - [What is a 1031 Exchange?](https://chicagoland1031exchange.com/1031-exchange-information/what-is-1031-exchange/) - [Delaware Statutory Trust 1031](https://chicagoland1031exchange.com/1031-exchange-information/delaware-statutory-trust-1031/) - [1031 Exchange Process](https://chicagoland1031exchange.com/1031-exchange-information/1031-exchange-process/) - [1031 Exchange Timeline](https://chicagoland1031exchange.com/1031-exchange-information/1031-exchange-timeline/) - [1031 Exchange Rules](https://chicagoland1031exchange.com/1031-exchange-information/1031-exchange-rules/) - [1031 Exchange FAQs](https://chicagoland1031exchange.com/1031-exchange-information/1031-exchange-faq/) - [1031 Real Estate](https://chicagoland1031exchange.com/1031-exchange-information/1031-real-estate/) - [Partnering with a 1031 Advisor](https://chicagoland1031exchange.com/1031-exchange-information/1031-advisors/) - [About Us](https://chicagoland1031exchange.com/1031-exchange-professionals/) - [1031 Professional](https://chicagoland1031exchange.com/1031-exchange-professionals/1031-professional/) - [A National Presence](https://chicagoland1031exchange.com/1031-exchange-professionals/a-national-presence/) - [Property Due Diligence](https://chicagoland1031exchange.com/1031-exchange-professionals/property-due-diligence/) - [Sample Exchanges](https://chicagoland1031exchange.com/1031-exchange-professionals/sample-exchanges/) - [Insights](https://blog.chicagoland1031exchange.com/insights-events) - [![brokercheck-white](https://chicagoland1031exchange.com/wp-content/uploads/2019/07/iconfinder_phone-call_2561306.png)(224) 245-5281](tel:224-245-5281) # Insights ![Blog Banner Image](https://blog.chicagoland1031exchange.com/hs-fs/hubfs/ch-website-images-header-homepage-option-03.jpg?width=1900&name=ch-website-images-header-homepage-option-03.jpg "Blog Banner Image") # Insights ### Subscribe to Our Blog - [1031 Exchange (17)](https://blog.chicagoland1031exchange.com/insights-events/tag/1031-exchange) - [DST 1031 Exchange (16)](https://blog.chicagoland1031exchange.com/insights-events/tag/dst-1031-exchange) - [COVID-19 (9)](https://blog.chicagoland1031exchange.com/insights-events/tag/covid-19) - [Insights (9)](https://blog.chicagoland1031exchange.com/insights-events/tag/insights) - [Coronavirus (7)](https://blog.chicagoland1031exchange.com/insights-events/tag/coronavirus) - [Delaware Statutory Trust (6)](https://blog.chicagoland1031exchange.com/insights-events/tag/delaware-statutory-trust) - [News (6)](https://blog.chicagoland1031exchange.com/insights-events/tag/news) - [Opportunity Zones (6)](https://blog.chicagoland1031exchange.com/insights-events/tag/opportunity-zones) - [Alternative Investments (5)](https://blog.chicagoland1031exchange.com/insights-events/tag/alternative-investments) - [Due Diligence (4)](https://blog.chicagoland1031exchange.com/insights-events/tag/due-diligence) - [NNN Lease (1)](https://blog.chicagoland1031exchange.com/insights-events/tag/nnn-lease) More Tags # A Brief Overview of Opportunity Zones ##### Written by [Nathan Kuhn](https://blog.chicagoland1031exchange.com/insights-events/author/nathan-kuhn) on July 08, 2019 - [Tweet](https://twitter.com/share) In 2017, the new federal tax law created [Opportunity Zones](https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions) with the goal of directing investment, development, and improvement in distressed communities around the United States. An Opportunity Zone is defined by the IRS as an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. As you may expect, Opportunity Zones are now, rightfully, getting a lot of attention. 1031 Exchanges and opportunity zones are similar in that they both offer investors an opportunity to defer taxes due on gains.  While 1031 exchanges are limited to investment property and must follow designated 1031 guidelines as outlined [here](https://chicagoland1031exchange.com/1031-exchange-information/1031-exchange-timeline/), opportunity zone investments can be made up to 180 days from the date the gain occurred and are not limited to investment property.  There could be situations in which an opportunity zone investment would make more sense for a real estate investor considering a 1031 Exchange - however I feel most real estate investors will continue to utilize 1031 Exchanges when possible.  I think many investors in opportunity zones will be investing gains from other appreciated assets, such as stock and businesses.     Representatives and their clients should consider several issues when deciding between these two options. While tax savings creates motivated investors, a third option – paying the taxes – may be superior to a poor investment which could result in significant capital loss. Despite the direction an investor pursues, he or she must intently focus on the underlying fundamentals of the investment (Source: [Tim Witt](https://thediwire.com/guest-content-opportunity-zones-vs-1031-exchanges/)). ### **Potential Benefits of an Opportunity Zone Investment** Investing in a qualified Opportunity Zone allows for a tax shelter of capital gains realized from any source (ie: sale of appreciated stock, sale of a business)—not just real estate—as long as the gains are invested within 180 days from when the gain is incurred. By investing gains into an Opportunity Zone, which typically occurs through an Opportunity Zone Fund, an investor may realize three tax benefits: 1. ##### The capital gains tax due that is attributable to the amount of gains invested in the fund is deferred until the year 2027. 2. ##### A portion of capital gains tax that would be due could be forgiven, as gains invested for 5 years receive a 10% step-up in basis, and gains invested for 7 years receive a 15% step-up in basis. 3. ##### Any gains resulting from the investment are not subject to capital gains tax, provided the investment is held for at least 10 years. ### **Opportunity Zone Benefits: An Example** An investor sells stock for $1 million. The gains attributable to the sale are $100K. Normally, the investor would have a tax payment due in the year the $100K of gains was realized. For this example, let’s assume the tax due would be $25,000. Instead of paying the tax, the investor decides to invest the $100K in gains into an Opportunity Zone Fund, in 2020. By structuring the investment this way, the investor delays their tax payment until 2027. Then, in 2027, the investor will receive a 15% basis step-up, assuming the investor is still in the same tax bracket and that tax rates have not changed. At that time, the investor would owe $21,250 in tax. In this example, the investor reduced their tax by $3,750 and delayed paying the tax for seven years. Additionally, if the $100K investment grew to any amount, all of those gains would be tax free. ### **Interested in Learning More?** There are many tax incentives to investing gains into an Opportunity Zone. However, for the investment to benefit an investor, tax incentives alone are not enough. It is crucial to evaluate the underlying investment itself, and we can help you do that. Currently, the Opportunity Zone Funds we have access to and all of the ones we have reviewed are available to accredited investors only (annual income of $200K (single) or $300K (joint), or a net worth of at least 1 million, excluding primary residence). Our firm has access to a variety of OZ funds that we can discuss with our clients. If you would like to know more, please don’t hesitate to [call us](https://www.kuhnwealth.com/contact). In the meantime, check out our current Availability Report [here](https://invest.chicagoland1031exchange.com/1031-exchange-properties)! Topics: [1031 Exchange](https://blog.chicagoland1031exchange.com/insights-events/topic/1031-exchange), [Opportunity Zones](https://blog.chicagoland1031exchange.com/insights-events/topic/opportunity-zones) [![Banner - Chicagoland 1031 - Availability Report CTA](https://blog.chicagoland1031exchange.com/hs-fs/hubfs/Banner%20-%20Chicagoland%201031%20-%20Availability%20Report%20CTA.png?width=730&name=Banner%20-%20Chicagoland%201031%20-%20Availability%20Report%20CTA.png "Banner - Chicagoland 1031 - Availability Report CTA")](https://invest.chicagoland1031exchange.com/1031-exchange-properties) [Previous Post](https://blog.chicagoland1031exchange.com/insights-events/an-eye-on-alternatives) #### [An Eye on Alternatives](https://blog.chicagoland1031exchange.com/insights-events/an-eye-on-alternatives) [Next Post](https://blog.chicagoland1031exchange.com/insights-events/the-value-of-thoughtful-due-diligence-with-1031-exchanges-and-opportunity-zone-investments) #### [The Value of Thoughtful Due Diligence with 1031 Ex...](https://blog.chicagoland1031exchange.com/insights-events/the-value-of-thoughtful-due-diligence-with-1031-exchanges-and-opportunity-zone-investments) - Latest Posts - Popular Posts [The DST Market Experiences Reduced Decline in Volume Compared to Commercial Real Estate Overall](https://blog.chicagoland1031exchange.com/insights-events/the-dst-market-experiences-reduced-decline-compared-to-commercial-real-estate-overall) [ 1031 Exchange](https://blog.chicagoland1031exchange.com/insights-events/topic/1031-exchange) [Housing Affordability and Its Impact on Real Estate Investments](https://blog.chicagoland1031exchange.com/insights-events/housing-affordability-and-its-impact-on-real-estate) [ 1031 Exchange](https://blog.chicagoland1031exchange.com/insights-events/topic/1031-exchange) [Why We Continue to See Opportunity in Multi-Family Real Estate Investments in 2022](https://blog.chicagoland1031exchange.com/insights-events/why-we-continue-to-see-opportunity-in-multi-family-real-estate-investments-in-2022) [ Insights](https://blog.chicagoland1031exchange.com/insights-events/topic/insights) [ News](https://blog.chicagoland1031exchange.com/insights-events/topic/news) [ 1031 Exchange](https://blog.chicagoland1031exchange.com/insights-events/topic/1031-exchange) [ COVID-19](https://blog.chicagoland1031exchange.com/insights-events/topic/covid-19) [ Coronavirus](https://blog.chicagoland1031exchange.com/insights-events/topic/coronavirus) [ Due Diligence](https://blog.chicagoland1031exchange.com/insights-events/topic/due-diligence) [![Chicagoland 1031 - Availability Report CTA](https://blog.chicagoland1031exchange.com/hs-fs/hubfs/Chicagoland%201031%20-%20Availability%20Report%20CTA.png?width=700&name=Chicagoland%201031%20-%20Availability%20Report%20CTA.png "Chicagoland 1031 - Availability Report CTA")](https://chicagoland1031exchange.com/1031-exchange-properties/) ## Need help with your 1031 exchange? ### We're here for you. 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Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last two years, and reasonably expects the same for the current year) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investor's situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of the services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Nathan Kuhn at 224-245-5281 Chicagoland 1031 Exchange does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances. Securities offered through DAI Securities, LLC, member [FINRA](https://www.finra.org/) / [SIPC](https://www.sipc.org/). Advisory services offered through Kuhn Wealth Management, Inc. (KWM), a state registered investment advisor. Insurance offered through DAI Securities, LLC. KWM dba Chicagoland 1031 Exchange is independent of DAI Securities, LLC. Copyright © 2022 Kuhn Wealth Management. 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