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Those looking to invest in real estate may find some promising prospects in federally-mandated opportunity zones. These are designated geographic areas that the U.S. Department of the Treasury has identified as a low-income census tract that could benefit from new development. Currently, there are 8,700 opportunity zones, and these areas have an average poverty rate of 29 percent.

Those who choose to invest in projects in the area get many tax benefits. They can defer capital gains taxes by reinvesting their gains from the project into an opportunity fund. If this investment fund holds the investment for five years or more, there is a step-up basis for reducing taxes on capital gains. Finally, if the opportunity fund sustains the investment for ten years, the capital gains are permanently excluded from capital gains taxation.

Keep in mind that not all projects can directly get tax benefits. Instead, real estate developments must vastly improve the properties in a way that benefits the community. Therefore, luxury properties like golf courses or country clubs may not qualify for the tax benefits. Opportunity zone investments can result in some advantageous gains for the savvy investor, but things are not as simple as investing and getting a profit immediately.

Remember that opportunity zones are areas where certain types of developments may not provide much of a return that requires tax breaks in the first place. Congress is also reviewing legislation that may require investors to prove a project qualifies for the opportunity zone tax deductions, so there may be more restrictions in the future.

Analytics firm Webster Pacific recently took a look at these thousands of opportunity zones to find the ones that provide the best possible investment opportunities. According to the research, the most promising zone is Gowanus of South Brooklyn, which has experienced a 21.6 percent increase in households making over $200,000 annually. Kings County, New York, has several of the best opportunity zones for investing. Some other potentially high performing areas include Vanderburgh County, Indiana, Oklahoma County, Oklahoma, Los Angeles County, California, And New York County, New York.