What's an Opportunity Zone?
As part of the new federal community development program established by Congress in the Tax Cuts and Jobs Act of 2017, Hawaii designated 25 census tracts as opportunity zones to encourage long-term investments in low-income urban and rural communities across the country. Its claimed goal is to promote entrepreneurship and growth capital for the country's economically challenged districts.
Investors who re-invest their unrealized capital gains into opportunity funds dedicated to investing in opportunity zones are eligible for a federal tax incentive under the opportunity zones program. The private sector investment vehicles that invest in opportunity zones are known as opportunity funds. The fund approach will allow a diverse group of investors to pool their resources in underdeveloped areas, increasing the size of investments made there.
Benefits for Investors
Capital gains reinvested in an opportunity fund are subject to a temporary tax deferral. The deferred gain must be realized no later than December 31, 2026, or the date the opportunity zone investment is sold.
Capital gains reinvested in an opportunity fund get a step-up in basis. The basis of the original investment is increased by 10% if the taxpayer holds the qualified opportunity zone fund for at least 5 years, and by another 5% if held for at least 7 years, allowing the taxpayer to exclude up to 15% of the original gain from taxation.
Maui Opportunity Zones
1. West Central Wailuku Neighborhood
The West Central Wailuku Opportunity Zone (Census 309.01) is located in Wailuku, a commercial center and the county seat of Maui's government, just 10 minutes west of the Kahului Airport. There are scores of family companies in this neighborhood, many of which have been in existence for decades. Local favorite shops, eateries, and bakeries can be found throughout these neighborhoods. A new Wailuku is growing among these cherished enterprises, with trendy boutiques, attractive cafes, and laid-back coffee shops.
2. Kahului and Surrounding Neighborhoods
On the island of Maui, the Spreckelsville Opportunity Zone (Census Tract 319) comprises a substantial portion of Kahului, Maui's largest municipality. Maui's primary airport (Kahului Airport), a deep-draft harbor, light industrial regions, and commercial shopping complexes, all of which are key investment drivers, are all located in this area. Kahului is Maui's shopping hub, with multiple malls and large retailers, including department stores in the Queen Kaahumanu Center.
3. Hali'imaile Neighborhoods
Upcountry Maui includes the Hali'imaile Opportunity Zone (census tract 304.04), which encompasses one of the most well-known communities, Makawao. Makawao, on Maui's Haleakala volcano's mid-slopes, with one foot in the plantation past and the other in the thriving arts community. This lovely area was previously ranked one of America's top 25 arts destinations. It is known for its paniolo or Hawaiian cowboys. Paniolo on horseback has been wrangling cattle in Maui's wide-open upland fields since the late 1800s.
To learn more about Maui's Opportunity Zones, contact us. Our team at Vacation Maui is composed of knowledgeable sales agents, including Kevin Spaise, the author of The Maui Condo Book - a resource used regularly by real estate professionals on the island of Maui and beyond!
