Qualified Opportunity Fund (QOF) Investment
A Qualified Opportunity Fund (QOF) Investment is an investment vehicle established to encourage long-term investments in designated low-income communities known as Qualified Opportunity Zones. Investors can defer and potentially reduce capital gains taxes by investing in a QOF.
To qualify, a fund must invest at least 90% of its assets in eligible property located within a Qualified Opportunity Zone. If the investment is held for a minimum of five years, investors can receive a 10% reduction in capital gains taxes; if held for at least seven years, the reduction increases to 15%. Additionally, any gains from the QOF investment itself may be tax-free if held for at least 10 years.
For example, if an individual sells stocks and realizes a capital gain of $100,000, they could invest that gain into a QOF, deferring the tax liability on that gain until the earlier of the sale of the QOF investment or December 31, 2026.
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