Investing in real estate offers more than long-term appreciation and income—it also provides significant tax advantages that can enhance overall returns. At Lowe Property Group (LPG), we work closely with experienced advisors to help investors understand and access the benefits available through strategic real estate investments.
Real estate provides several tax benefits that can improve an investor’s net returns. While every investor’s tax situation is unique, some of the most common advantages include:
Allows you to deduct a portion of the property’s value annually, reducing taxable income even as the property may appreciate.
Real estate held long-term is typically subject to lower capital gains tax rates, offering more favorable treatment than ordinary income.
Investors can deduct mortgage interest and property expenses like maintenance, repairs, and management fees—reducing taxable income and boosting net returns.
Opportunity Zones (OZs) are federally designated areas aimed at encouraging long-term private investment in underserved communities through significant tax incentives. Created by the 2017 Tax Cuts and Jobs Act and updated through the 2025 One Big Beautiful Bill, the program allows investors to reinvest capital gains into Qualified Opportunity Funds (QOFs), which must then deploy capital into real estate or businesses within these designated zones.
KEY BENEFITS
Taxes on eligible capital gains (from any asset sale) can be deferred until the earlier of December 31, 2026 (under pre-2025 law; now extended under new legislation), or when the OZ investment is sold.
(for investments held 5+ years — only available for gains realized before 2022)
Investors previously received a 10% step-up in basis for gains held at least five years. Although this benefit has expired, it was a key component for early investors.
If the OZ investment is held for 10+ years, any appreciation on that investment is entirely tax-free. This is the program’s most powerful benefit, allowing investors to permanently exclude future gains from federal capital gains tax.
As of 2025 reforms, the OZ program has been made permanent, with zones to be re-evaluated every 10 years starting in 2027 — allowing states to update designations as neighborhoods evolve.
Capital must be invested into a Qualified Opportunity Fund (QOF) within 180 days of realizing a capital gain.
The QOF must invest at least 90% of its assets into Qualified Opportunity Zone Property.
For real estate, this generally means developing new projects or substantially improving existing ones (must double the basis of the building improvements within 30 months).
Ideal for long-term investors seeking both social impact and strong after-tax returns.
Enhances risk-adjusted returns by combining potential appreciation with significant tax savings.
Often used in conjunction with other programs such as HUD 221(d)(4) loans or LIHTC to further enhance economics and reduce risk.
Opportunity Zone investing enables investors to defer current capital gains, benefit from long-term tax-free appreciation, and direct capital toward revitalizing economically distressed areas—making it a powerful tool for both impact and portfolio performance.
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