how can we use Turbotax to claim opportunity zone investment in 2021

[axing]

What is the best way to use Turbotax to claim the investments in opportunity zone funds in 2021

[tagteam · Accepted solution]

TurboTax does not support the form you need to report an opportunity zone investment; Form 8997.

[axing]

Thank you. So if I file form 8997 on my own, which form in Turbotax will take the result of form 8997?

[DMarkM1]

The form 8997 cannot be filed separately it is attached to the 1040. The deferred gain is not reported on the 1040, but is reported separately in an attached form 8997.   

[axing]

Thank you.  Then does form 8949 in Turbotax support the deferal using code Z?

Also, sounds like I must file the tax by mail?

Thank you

[tagteam]

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@axing wrote:

Thank you.  Then does form 8949 in Turbotax support the deferal using code Z?

Also, sounds like I must file the tax by mail?

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I am almost positive it does not support using code Z without an override, in which case you would have to print and mail but your TurboTax accuracy guarantee would be void.

[axing]

Thank you. I have tried to look for code Z in form 8949 in Turbotax and it appears only allow code O for taking exceptions. So I guess the best way is to override it there, then file by mail. 

I have checked Taxact which does support all those but it is much less useful for all other topics. It is regretable that TT somehow choose to not support 8997 and the related sections of 8949 but it is stil a superior product. I guess it might be too fluid for TT to include it and stil guranttee the accuracy.

[AmyC]

Here is a link to the calculations that Turbo Tax does not handle. The 8949 is on page 1, number 3 for code z issue.

[tagteam]

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@axing wrote:

....I guess the best way is to override it there, then file by mail.

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You can certainly file by mail, but just note that overrides do void the TurboTax accuracy guarantee (for whatever that is worth to you).

[mearch]

It's ridiculous that Turbotax can't handle opportunity zone investments 5 years into the process.  This has been a huge pain in the [profanity removed] and forced me to look for other solutions.  The only way is to override and manually enter which then requires you to print and mail your return.  It sucks that they can't handle what is now a common issue but changing software is also a pain.  

[axing]

After investigating how other software such as Taxact does it, I think I found a work around. If you check out Taxact, they don't file the capital gain and the subsequent QOF investment in one raw. Instead, they separate it into two transactions:

one is filing the capital gain form to report your gains, which is easily done in Turbotax; the QOF is reported as another investment transaction -- buying $0 on the day of the capital gain,  selling the QOF investment $ amount as negative # on the day of QOF investment. Write 'QOF investment, code Z' in the description. At least Turbotax will calculate the tax correctly and it didn't complain when I did this in the software.

I plan to efile and see what happens. If IRS accepts it, I will just mail form 8997 to IRS.

Following the instructions in Turbotax then override it will result in incorrect tax amount. So it doesn't work that way.

[mearch]

Appreciate the suggestion.  Please let us know how it works out. Thanks

[Rubble2]

How do you handle Tax year 2027, when you need to pay capital gains on the amount that was deferred via the opportunity zone investment.   And, I believe from 8997 must  be filled each year until that time? 

[ErnieS0]

TurboTax does not support Forms 8996 or 8997 at this time. Form 8996 is filed annually @Rubble2.

No one at TurboTax knows what forms will be supported in 2027. Tax laws change every year.

[mpjph]

@axing , thanks for the tip.  That sounds like a reasonable approach.  Were you able to efile? How did you enter the QOF investment?  Did you explicitly add the entry in 8949 or is there a way to use step-by-step?  Thanks!