Let's say someone sold a business, crypto, or Apple stock or triggered any other significant capital gain tax. What if you could delay paying taxes on those capital gains until April of 2027, potentially cut the bill significantly, and invest in private real estate or businesses with income and appreciation potential? With Opportunity Zone Funds, you can do all that - and, after 10 years, pay no tax on the growth!

What Is an Opportunity Zone?

OZones were created by the 2017 Tax Cuts and Jobs Act. If you roll eligible capital gains into a Qualified Opportunity Fund (QOF), which invests in real estate or businesses in over 8,700 designated zones, and do so within 180 days of realizing your gain (significantly longer for certain pass-through entities, such as partnerships and S Corps), you will defer tax on those gains.

So What's the Big Deal if I Hold for at Least 10 Years?

If you hold a Qualified Opportunity Fund investment for at least 10 years, you can sell it without paying not only the federal capital gains tax, but also the 3.8% Net Investment Income Tax, depreciation recapture - and in most states (including Massachusetts), avoid state capital gains tax as well. You keep all the appreciation and the depreciation deductions you claimed along the way without giving a big chunk back, There are excellent estate planning benefits too.

Why They're Not Going Away

This program has been extremely successful, creating over 313,000 housing units and nearly $100 billion in private investment. This has channeled private sector investment into projects that might not have happened otherwise. It has been a powerful engine for job creation, economic growth, and revitalizing underserved communities. The One Big Beautiful Bill Act has now made this permanent.

Are Qualified Opportunity Funds Rights for Everyone?

QOF's can be attractive for investors with eligible capital gains who want to defer taxes, potentially reduce what they owe, and eliminate tax on future growth. However, they are typically long-term, illiquid investments, and many offerings are available only to Accredited Investors under securities regulations.

The Strict Timelines You Need to Follow... Timing is Everything

• 180-Day Rule: If you sell something and make a profit (capital gain), you have 180 days to reinvest that gain into QOF... with longer planning opportunities for partnerships or S Corporations.
• Deferred Taxes Must Be Paid: That deferred gain will be taxes either when you sell your fund investment or when you file your 2026 taxes, whichever comes first.
• 10-Year Bonus: Hold the fund for at least 10 years, new appreciation is not taxed!

The Pros:

• Significant Tax & Estate Benefits
• Long-Term Growth Potential
• Positive Community Impact
• Flexible Asset Classes

The Cons:

• Strict Compliance Rules
• Illiquidity
• Market and Project Risk
• May need to be an Accredited Investor
  

How can Northern Bank’s Wealth Management Partner, Asset Strategy, Help?

Opportunity Zones are a powerful way to invest with significant tax advantages. If you've realized capital gains, email WealthManagement@NBTC.com to see how Northern Bank's partner, Asset Strategy, can help you put them to work.

DISCLAIMER:

Because investor situations and objectives vary this information is not intended to indicate suitability or a recommendation for any individual investor. This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Product guarantees are based on the claims-paying ability of the issuing company and assume compliance with the product’s benefit rules, as applicable. There are retirement account risks that could diminish investor returns, such as, but not limited to: low interest rates, market volatility, withdrawal timing and sequence of returns risk, government policy uncertainty and increased longevity. Prospective investors should perform their own due diligence carefully and review the “Risk Factors” section of any prospectus, private placement memorandum or offering circular before considering any investment. Advisory services offered through Asset Strategy Advisors, LLC (ASA), an SEC registered investment adviser. Insurance services offered through Asset Strategy Financial Group, Inc. (ASFG). CIS, ASA and ASFG are separate companies.

Products and services made available through Asset Strategy and Concorde Investment are not insured by the FDIC or any other agency in the United States and are not deposits or obligations of, nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.