- Are you planning on selling your private business but face a large tax bill?
- What is a Qualified Opportunity Zone or Qualified Opportunity Zone Fund?
- Do you understand how to increase your long-term tax efficiency while investing in real estate?
“Taxes are killing us, but I don’t know all the strategies.”
– Anonymous Pest Control Owner
Qualified Opportunity Zones (QOZ) were established under the Tax Cuts and Jobs Act of 2017 to incentivize real estate investment in areas that offer an opportunity for community revitalization. QOZ funds offer diversified real estate investments in these areas. The funds present an intriguing opportunity to lower your lifetime capital gains tax related to a business sale.
For instance, these funds allow for the deferral of capital gains taxes from the sale of a business if the gains are invested into a QOZ fund (certain timelines apply). This deferral of payment lasts until December 31, 2026, or until the QOZ investment is sold, whichever is earlier. However, there is current bipartisan support to extend this date. This deferral is particularly beneficial since the expected tax payment can be invested in short-term U.S. Treasury bills generating interest income that currently yields over 5.5%, risk-free.
More importantly, the longer the QOZ fund investment is held, the greater the tax benefits. For instance, an investment in a QOZ fund held for greater than 10-years will pay no capital gains tax on the gains achieved in the fund. Yes, no taxes.
Consider a pest control business owner who will realize a large capital gain from the sale of their company. Redirecting a portion of these gains into a QOZ fund enables them to defer and reduce their immediate tax burden significantly. Over a decade, this strategy can lead to substantial growth of the invested amount while avoiding any additional taxes on these new gains. This approach effectively turns a tax liability into an opportunity for further wealth generation.
At Essential Partners, we help pest control business owners prepare for a sale across multiple dimensions including tax mitigation, investment management, trust & estate and cash flow planning while utilizing our Family Office Services pre- and post-sale.
This presentation contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this presentation will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Essential Partners, LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Investment advisory services offered through Essential Partners, an SEC registered investment advisor.