Go Zone Investing
NEW ORLEANS, LA
Gulf Opportunity Zone Act 2008
M I C H A E L C O S T A N Z A M E C I N V E S T M E N T S , L L C
Investment Property Tax Savings!
Tax savings from investment Specifically, the Act provides a This bonus depreciation can
opportunities! Imagine a $65,000 50% bonus first year depreciation result in substantial savings if
tax savings from purchasing a allowance and 10% annually implemented properly. For ex-
property in a certain area. The thereafter to attract outside ample consider:
Gulf Opportunity Zone Act of investors into the Go Zone Af-
• $150,000 Home Purchase
2005 does exactly this. The Act
was signed into law in December • Qualified Go Zone Property
2005 as a tax relief measure to
• $20,000 Land Value
assist victims of Hurricanes
$130,000 Structure Value
Katrina, Rita, and Wilma; and has
extended its reach to investors. (Bonus First Year Depreciation is
50%, that's $65,000!)
The Act simply includes tax in-
centives to encourage rebuilding, Imagine being able to take
redevelopment and revitalization $65,000 off of your income tax
of Orleans Parish (New Orleans 3317 Riverland Drive return and carry it back for the
Metro Areas) and St. Bernard last five (5) years and/or carry it
Chalmette, LA 70043
Parish (Chalmette Metro Areas) forward for the next twenty (20)
and a few other areas most af- years; all while getting to pur-
fected by the hurricanes. fected Areas. chase a great appreciating and/or
This act includes both commer- income producing asset in the
Of great importance to real es-
cial and residential real estate, process.
tate investors is the Bonus De-
preciation established by this Act. acquired and placed into service (see inside for more details *1.2)
before December 31, 2010.
Go Zone Property Qualifications
To qualify for bonus deprecia- tially renovated, placed into ser- “if the taxpayer meaningfully
tion, a property must be in one vice (use) by the required dead- participates in the management
of the Go Zone Affected Areas. lines; and meet the requirements of operations of the trade or
Orleans Parish (county) and St. of being a part of the taxpayers business. The determination is
Bernard Parish (county) qualify trade or business. based on all facts and circum-
for this area and include cities For the purpose of bonus depre- stances.
such as New Orleans and Chal- ciation, a trade or business is
mette, among many others. The actively conducted by a taxpayer
property must also be substan- (see inside for more details *2.2)
*1.2 Continued… Tax Savings!
In a nutshell, the Go Zone $150,000 minus the land value Internal Revenue Service by
allows investors to invest in of $20,000 , leaves a basis in $22,750 the first year. That is
areas affected by Hurricanes the property of $130,000. The $22,750 real money!
Katrina, Rita and Wilma; and basis of the property is depre-
then affords the investor a 50% ciated the first year by 50%,
first year tax depreciation. In that’s $65,000. More than There are multiple conditions
other words, if you invest in that, the depreciation can be that must be met in order to
and or rebuild a property val- carried back 5 years on previ- qualify for the tax savings
ued at $150,000, for the pur- ous tax returns and forward windfall, but for those who
pose of this explanation, you 20 years on future tax returns. qualify, the savings can be
can qualify for a tax credit in enormous.
same year it was purchased or
renovated for the amount of In terms of dollars and cents, a
$65,000 tax credit for a person (see the Qualifications section
“...50% deprecia- its basis (value less land). As on the next page for more
an example the purchase price in the 35% tax bracket will
tion...$65,000 first details)
of a property valued at reduce their liability to the
year tax credit...”
Example Property Depreciation
This is an example 3317 Riverland Drive • Year Two: 10% Bonus Total Depreciation = $130,000
Depreciation = $13,000
of a real property, Chalmette, LA 70043
• Year Three: 10% Bonus The total tax savings for a
recently sold using Depreciation = $13,000 person in the 35% tax bracket
• $150,000 Purchase Price • Year Four: 10% Bonus
is $45,500 real money!
the benefits of the
• Land Value $20,000 Depreciation = $13,000
Go Zone Bonus All of which can be carried
• Structure Value $130,000 • Year Five: 10% Bonus
Depreciation. Depreciation = $13,000 back for the last five years and/
• Year One: 50% Bonus or forward for the next 20
Depreciation = $65,000 • Year Six: 10% Bonus years.
Depreciation = $13,000
How do I
Investment Exit Strategies?
Exit strategies should property , there are a few not require the repayment of
be considered on all things to consider. A simple the Go Zone bonus deprecia-
and what to investments and will sale of the investment prop- tion until a later date. Most
consider vary depending on erty will require recapture of investors looking long term
after full each investors per- the bonus deprecation used will find this method favorable
deprecia- sonal and long term during the term of ownership. and this will allow for contin-
tion. goals. When dealing However, the investor has an ued financial growth.
with accelerated de- option of rolling the invest- “It is recommended that you
preciation and then ment into a 1031 Tax De- consult with your tax profes-
the future sale of a ferred Exchange, which will sional regarding possibilities.”
GO ZONE INVESTING
MICHAEL COSTANZA PAGE 3
Do you qualify to participate in the Go Zone?
This is by far the most misunder- If an individual is a advisors overlook a simple ap-
stood topic when considering the “qualifying taxpayer” proach that could substantially
Go Zone. There are essentially also known as a real benefit their clients. Consider the
two ways to qualify for the Bonus estate professional, case of one spouse working with
Depreciation. methods to the activity is consid- high income and another that does
qualify.” ered non-passive, not work. It is quite conceivable
The first is you and/or your spouse “we suggest you
is already an Real Estate Profes- thus allowing losses that with the purchase of one or
sional. from qualifying real more Go Zone properties, the non and your tax
estate activities to offset other non- -working spouse could be set up to
The second is you and/or your passive income such as wages, in- run a management LLC for pur- advisor explore
spouse actively participates in the terest, dividends, capital gains, trade poses of managing those properties.
business of renting the property. your situation
or business income, etc. However, By accounting for all time spent
We emphasize the second as it for taxpayers having adjusted gross while researching properties on the relative to the
consist of several methods of quali- income less than $100,000 there is net, dealing with advisors, making
fying. There are many ways one another option. AGI is you and decision on renters, logging incom- other cases that
can structure oneself to take advan- your spouses gross income if mar- ing income, etc., it becomes quite
tage of the Go Zone Bonus Depre- ried with either itemized or stan- conceivable for that person to now we have presented
ciation. dard deductions subtracted. This qualify as a real estate professional. here”
For some, they may find out with a AGI is a standard line item on your This method will still require the
few simple steps, themselves and/or tax return. There is a special al- same time constraints as listed
their spouse could become a real lowance that allows you to deduct prior in real estate professional.
estate professional by forming an up to $25,000 in rental loss from
LLC management company. your regular income. For taxpayers
between $100,000 and $150,000, The fifth method is if you are the
For others, they may already be in a then there is a special phase out case where your adjusted gross
position to take advantage of the rule. Remember, you will still need income is greater than $150,000,
Go Zone benefits but their tax to meet the material participation you and your spouse both work full
professionals may not be up to requirements, which can generally time, and you have no passive in-
speed on the additional methods be met with proper structuring and come, then you are admittedly in
available. logging of hours. the most difficult category to real-
There are really five additional ways ize Go Zone benefits, but we sug-
The third method is any income gest you and your tax advisor ex-
to qualify. The first being a Real with other passive income. Many
Estate Professional. This means plore your situation relative to the
higher net worth individuals are other cases that we have presented
that more than half of the personal ideal candidates for reaping Go
services you performed in all trades here to make sure there is not a
Zone Bonus Depreciation because, method for you to use.
of businesses during the tax year many of them already own income
were performed in real property producing properties or other as-
trades or businesses in which you sets that produce passive income.
materially participated and/or you If you get income from activities
performed more than 750 hours in We strongly recommend that you
other than a regular job or sale of consult with your tax professional
services during the tax year in real stock/bonds, you really should ex-
property trades or businesses in or tax attorney, to make sure you
plore with your tax advisor if any of qualify using one of many methods
which you materially participated. that qualifies as passive income. and explore other qualifying oppor-
The second method is having less tunities.
than a $150,000 Adjusted Gross
Income (AGI). The IRS treats most The fourth method is any income,
rental activities as passive, and pas- with one person working less than
sive losses can be offset only by full time. This situation is ex-
passive income for many taxpayers. tremely common however tax
Visit our web site for new and upcoming invest-
ment projects. http://www.mecgz.com
MEC Investments, LLC
Michael Costanza If you would like to be removed from this mail-
1208 E. Genie Street ing list, please email firstname.lastname@example.org and
Chalmette, LA 70043 place in the subject line “REMOVE PLEASE”
or simply call 504-373-5308 and leave a mes-
sage with your email address for removal.
Thank you and have a blessed day.
Visit these websites for more information per-
taining to the Gulf Opportunity Zone Act:
E-mail: email@example.com www.house.gov/jct/x-88-05.pdf
Were on the web!
Who are we?
MEC Investments, LLC is a conglom- Zone areas, we can handle your re- sible for you to have a free stay.
erate of investors, attorneys, real quest from start to finish in a profi- Thank you for reviewing this pam-
estate brokers, insurance adjuster, cient and professional manner. phlet and we look forward to discuss-
lenders and general contractors that Our conglomerate has handled over ing it in further detail at your conven-
offer a full service one stop opportu- 100 property renovations both com- ience.
nity to invest in properties in the mercial and residential and have facili-
New Orleans Metro areas known as tated over 55 Go Zone Investments
the Gulf Opportunity Zone Act, the for clients all over the country. We Notice: The purpose of this sum-
”Go Zone”. We have been in busi- would like to have the opportunity to mary is to provide general informa-
ness for five years and have had suc- discuss your specific needs and the tion, rather than advice or opinion. It
cess in finding and taking advantage of possibilities of what your long term is accurate to the best of the authors’
investment opportunities in different goals our. We are available for knowledge as of the date it was writ-
markets. phone calls, emails and would like to ten. Accordingly, this summary
The Gulf Opportunity Zone Act of- have the chance to give you a full should not be viewed as a substitute
fers wonderful investment opportuni- physical tour of the New Orleans for the guidance and recommenda-
ties and falls into our specialty. Metro Area and all of its investment tions of a retained tax professional or
Whether you are looking to pur- opportunities. tax attorney. We strongly suggest
chase, renovate and flip a single resi- consultation with a tax professional
If you are interested in visiting the or tax attorney prior to investing in
dential or commercial property; or New Orleans Metro Area and would
take advantage of numerous proper- any Go Zone property for the Bonus
like a physical tour, please call to Depreciation benefits available.
ties for long term holdings using the discuss as arrangements may be pos-
bonus depreciation allowed in the Go