The 180-Day Investment Period for Qualified Opportunity Funds (QOF) refers to the time frame within which a person or entity must invest their capital gains into a QOF in order to qualify for specific tax benefits under the U.S. federal tax code.
This rule was established under the Tax Cuts and Jobs Act of 2017. It created Qualified Opportunity Zones (QOZs) to promote economic growth in distressed communities. Under this legislation, if an investor realizes capital gains from the sale or exchange of an asset, they can defer taxation on those gains if they are reinvested into a QOF within 180 days.
The 180-Day Investment Period generally starts on the date the capital gain would be recognized for Federal income tax purposes. By investing in a QOF within this window, the investor is eligible for several benefits, including:
- Deferral of capital gains taxes until the end of 2026 or until the QOF investment is sold or exchanged (whichever comes first).
- Reduction of capital gains taxes if the QOF investment is held for a certain period. If the investment is held for at least five years, the taxable amount of the original gain is reduced by 10%. If it’s held for seven years, the reduction is 15%.
- No tax on any post-acquisition gains from QOF investments held for at least ten years.