In a very simplistic explanation, an individual with a capital gain from the sale of an appreciated asset is obligated to pay 23.8% in federal tax. To spur the transfer of stagnant assets, the new tax law allows a deferral of capital gains taxes for up to 10 years, provided that you invest that gain in a business or business property in a designated Opportunity Zone. Investments that remain for the full 10 years will see a reduction in their basis of 15%. What that means is that $1 million gain, taxable at $238,000 today would actually be based on a value of $850,000 and approximately $202,000 in taxes. This is effectively a 3.6% return on investment. But it gets much better. The appreciation of the new investment will not be taxed for capital gains at the end of the 10 years.
The 2017 Tax Cuts and Jobs Act enacted in 2017 has created an exciting opportunity for private investors in America. This legislation was designed to stimulate long-term private investment in distressed areas throughout the country.
The opportunity zone legislation aims to incentivize private capital to accelerate economic activity in designated Opportunity Zones. An Opportunity Zone, by definition, is an area which has high unemployment, high poverty rates, or low per capita income. The area loosely defined as East Cody, east of Highway 120, is a designated Opportunity Zone.
The State of Wyoming has 25 Opportunity Zones chosen by the governor to improve economic vitality and support diversification efforts. Coupled with Wyoming’s favorable tax climate, investors will find Opportunity Zones in Wyoming a fruitful investment.