Opportunity Zones were created to help economically distressed communities benefit from a capital gains tax incentive. On March 21, 2018, Governor Abbott designated 628 census tracts in Texas as Opportunity Zones, with one designated tract covering downtown Amarillo and part of the Barrio Neighborhood Plan area.

Qualified Opportunity Funds can invest in eligible real estate and operating business projects

How to Qualify for an Opportunity Zone Incentive

To qualify for an Opportunity Zone Incentive, follow these steps:

Sell

To begin the process of qualifying for an Opportunity Zone, you'll need to sell a building or asset and realize capital gains. This involves transferring ownership of the property or asset in exchange for a financial gain. For example, if you sell a building for $2 million and the initial investment was $1 million, resulting in a $1 million profit, you've realized a capital gain.

Deposit

Deposit the capital gain into a Qualified Opportunity Zone fund, which is used to purchase real estate, partnership interest, or equity in an existing business inside an Opportunity Zone Census Track. This defers the capital gains tax. For instance, depositing $1 million of capital gain defers $150,000 in capital gains tax.

Hold Assets

Hold the asset inside the Qualified Opportunity Fund for 5 or 7 years to reduce the cost basis and capital gain tax. Holding for 5 years reduces the cost basis by 10% and the capital gain tax by $15,000. Holding for 7 years reduces the cost basis by 15% and the capital gain tax by $22,500.

10-Year Sell

After 10 years, if you sell the asset for $2 million ($1 million capital gain), you pay no capital gains tax on the $1 million appreciation.

Total Tax Savings at 10 years can be significant, totaling $172,500 ($22,500 savings from the original $1 million capital gain plus $150,000 savings from the $1 million capital gain of the Qualified Opportunity Fund).

Additional Resources

There are several online resources to learn more about Opportunity Zones. Find below links to the IRS, U.S. Department of Treasury, and the Economic Innovation Group Opportunity Zones resources.

• IRS Frequently Asked Questions 
• U.S. Department of Treasury, Regulations released April 17, 2019 
• Economic Innovation Group

Disclaimer: The Opportunity Zone tax provisions are not administered by the City of Amarillo. Current law and guidance provide no regulatory oversight by a local or state government. The information provided on this page is intended for resource and educational purposes only and does not endorse a specific opportunity zone fund.