A Qualified Opportunity Fund (QOF) is an investment vehicle established by Congress in 2017’s Investing in Opportunity Act. The Investing in Opportunity Act revised the U.S. tax code to provide incentives for investments made in designated geographic locations in need of job creation and economic stimulus.
By investing in these specifically designated zones, known as Qualified Opportunity Zones (QOZs), investors can defer, reduce or even eliminate capital gains tax liability, depending on how long the investment is held. As investors enjoy the significant tax benefits of QOFs, their money enables local communities to experience the same economic growth as more affluent areas of the state and country. Tax incentives can also attract investor capital to spur economic development in rural parts of a state.
Like any investment, it is important to understand the details — as well as potential risks and rewards — that a QOF can offer before deciding to proceed.