Just like any real estate investor, you’re looking for benefits, rewards, and tax breaks to maximize your real estate investment return. With the U.S. Treasury’s new “Opportunity Zone Program”, investment opportunities opened up in Ocean City, MD, creating new tax breaks for redevelopment projects that you need to take note of.
In 2017, the U.S. Treasury created, under the 2017 Tax Cut and Jobs Act, a program which designated and approved areas as “Opportunity Zones” where tax benefits of capital gains in order to redevelop underserved communities.
In Maryland, there are 149 approved census tracks that are designated as Opportunity Zones. In Worcester County, MD, there are 3, and one is an area in Downtown Ocean City, Maryland just north of 33rd Street to the Inlet.
Prime Ocean City, MD real estate opportunities for redevelopment
Some of the property types that may be considered include, but not necessarily limited to:
- Land options
- Beachfront hotels
- Oceanblock hotels/motels
- Multi-family properties
There are a variety of options, and some real estate agents are starting to get inquiries. Fund managers, private placement companies, and investors are seeking real estate opportunities in the coastal real estate market.
If you’ve been to Ocean City, MD recently, you’ve seen some new buildings on the horizon. For example there is a new 1st St bayfront hotel, which will include hotel rooms and a restaurant, and it is conveniently located within walking distance to the boardwalk. Other properties have hit the Ocean City, MD real estate market that have redevelopment potential.
Incentives available in Opportunity Zones
Developers or fund managers looking at Ocean City as a source for investments can consider some of the following tax breaks as defined on the U.S. Treasury’s website, which may include:
· Temporary Deferral: A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
· Step-Up in Basis: For capital gains reinvested in an Opportunity Fund the basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
· Permanent Exclusion: a permanent exclusion from taxable income of capital gains from sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.
This incentive is now becoming a big topic in Ocean City and around the U.S.. The U.S Treasury has issued a press release with guidance about the newly launched program. To discuss your options, schedule a free consultation. I'll share a list of possible Ocean City, MD properties for sale within the opportunity zone.
Additional Opportunity Zone Information:
- Department of Treasury Opportunity Zone Resources: CDFIFund - Opportunity Zones
- Department of Treasury Press Release: U.S. Treasury Press Release April 2018, Tax and Jobs Act 2017, Department of Treasury: Proposed Regulations and Guidance for Opportunity Zones - October 2018
DISCLAIMER: This article is provided for informational purposes only. Consult with your accountant, financial advisor, or tax attorney about any tax breaks or incentives as a result of investing in a opportunity zone or an real estate related transaction.
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