Tax incentive for investors.
Merced has seven Opportunity Zones.
Opportunity Zones provide tax incentives to individual investors who reinvest capital gains in new developments or businesses.
Deferral of existing capital gains tax and and stepped forgiveness of additional gains at 5, 7 and 10 years, through basis increases.
Merced's seven Opportunity Zones
Census Tract 13.01
Downtown, residential, commercial, office, government, transportation hub, university
Census Tract 13.02
Downtown, residential, commercial, office, government
Census Tract 14.01
Residential, office, commercial, hospitality
Census Tract 15.01
Industrial, airport, residential, sports complex, government, future industrial
Census Tract 16.01
Medical, office, residential, heavy commercial
Census Tract 16.02
Residential, ag, future industrial
Census Tract 17.00
Hospitality, mixed use, commercial, office, residential, neighbor commercial
Merced's seven Opportunity Zones are located in the southern portion of the city. They are identified by Census Tract.
Source (and interactive map): California Dept. of Finance.
What are Opportunity Zones?
Opportunity Zones provide tax incentives to individuals who reinvest capital gains in new developments or businesses through a Qualified Opportunity Fund. Federal legislation created Opportunity Zones to promote investment in low-income census tracts.
Advantages to investors:
Tax deferral on prior capital gains until investment is sold or exchanged or Dec. 31 2026.
Basis value increases by 10% and 15% respectively for investments sold after 5 or 7 years.
Basis value becomes equal to fair market value of investment at the time of sale if investment is held for at least 10 years.
Learn more about IRS Opportunity Zone Regulations here.
How the zones promote economic growth in Merced
Individual Investors. Individuals can defer or reduce capital gains taxes (see chart below) by reinvesting their gains in a Qualified Opportunity Fund which, in turn, invests in an Opportunity Zone, or self-certify with the IRS for investment in the Opportunity Zone.
Developers. Developers can seek investment by an Opportunity Fund for residential, commercial or industrial projects in an eligible Opportunity Zone.
Business Owners. Businesses operating in Opportunity Zones can seek investors through Opportunity Funds.