Are you looking to invest in real estate in Los Angeles County? If so, you may be eligible for some tax incentives that can help you save big during tax season. An Opportunity Zone is an economically struggling community that has been nominated for designation by the state and certified by the United States Secretary of the Treasury. This designation allows new investments to be eligible for preferential tax treatment. When you rent a property in Los Angeles, you can get big savings during tax season, making a rental home a lucrative and highly beneficial investment for a Los Angeles real estate investor.
The IRS allows several tax exemptions when you own a rental property, making even repairs and renovations more affordable and helping to generate higher profits at the end of the year. In California, investments in commercial and multifamily real estate, as well as businesses that are not in a prohibited category, qualify for inclusion in Opportunity Zones. If an investor keeps their money in an opportunity fund for at least 5 years before December 31, 2026, they will reduce their deferred capital gains tax liability by 10%, while if they hold the funds seven years before that date, they can reduce their tax bill by 15%. Other than that, Opportunity Zone advocates point to examples of the tax relief that has led local banks, businesses and people with high net worth to invest not in distant metropolises, but rather in their own backyards. The purchase of real estate located within an opportunity zone must lead to the construction of a new building or the substantial rehabilitation of a building within 30 months of the purchase. Like Koreatown in Los Angeles, this is increasing the demand for multifamily rentals, as well as the demand for commercial real estate in the area.
In addition to downtown Los Angeles, Koreatown is another fast-growing neighborhood in Los Angeles, nearly all of which is within a QOZ. Downtown Los Angeles (DTLA) and, in particular, the Los Angeles Arts District, is one of the fastest-growing urban areas in Los Angeles County. And even though data is scarce and capital is just beginning to flow in, anecdotal reports suggest that Los Angeles is a microcosm of how the program is being developed nationwide. The Opportunity Zones program allows individuals to defer eligible capital gains until December 31, 2026, provided that they invest in an Opportunity Fund. This specialized financial instrument must place at least 90% of its assets in commercial real estate or qualifying businesses within one of the 8,700 U. S.
census areas designated as Qualified Opportunity Zones. The benefits of investing in opportunity zones in California are the same as those of investing in opportunity zones anywhere in the United States. The types of deductions will ultimately depend on the type of property you own and where your property is located in Los Angeles. For more information on the Opportunity Zone Program, see Opportunity Zone Program Guide for Commercial and Multifamily Real Estate Investors and on Opportunity Zones in Commercial Real Estate.