I'm a long-time lurker, but I haven't seen much talk about this particular topic of the new tax laws, so I thought I would bring it up.
I listened to an episode of Freakonomics "Why the Trump Tax Cuts are Awesome/Terrible (Part 1)" which mentioned very briefly a new program which allows deferring capital gains from current investments by re-investing them within 180 days into "Qualified Opportunity Zone" funds, which would then have more tax benefits the longer you hold (at five years, seven years and 10 years). Timestamp is around 41:35.
Besides the financial benefits, the idea behind it, according to the below source material, is to promote investment and development in "distressed" areas where larger-than-normal portions of the community are in poverty or unemployed. Some say it will help, some say it will only hasten gentrification.
My questions to the group are:
- How do you feel in general about this newly-formed tax benefit?
- As buy-and-hold type investors, could the option to defer even more of your tax liability persuade you to re-invest your CG into an "Opportunity Zone Fund" rather than back into VTSAX or another equity fund? Obviously there would seem to be more risk involved.
I'm just reading and learning about all this within the past few minutes from the below sources if anyone hasn't read up on this yet:
- Tucked Into the Tax Bill, a Plan to Help Distressed America from New York Times, dated Jan, 29, 2018.
- Opportunity Zones: What They Are, Why They Matter by Affordable Housing Finance, dated Feb. 26, 2018.
- Here is an interactive map where you can view which sectors of each state are eligible to be nominated for the "Opportunity Zone" tax benefit.
- Will Opportunity Zones help distressed residents or be a tax cut for gentrification? by the Brookings Institution, dated Feb. 26, 2018.
Thanks all, feels good to actually compose a post!