What Are The Tax Benefits?

• 

  Defer

  Investors may defer the payment of capital gains by rolling realized gains into a Qualified Opportunity Zone ("QOZ") Fund. Under the current Opportunity Zone program, eligible gains invested in a QOZ Fund may be deferred until December 31, 2026.

  Capital gains generally need to be invested in the QOZ Fund within 180 days of the sale or transaction that generated the capital gain. Beginning January 1, 2027, OZ 2.0 introduces a new rolling five-year deferral period for eligible gains invested in QOF, replacing the current fixed deferral deadline and creating a renewed planning window for investors.

• 

  Reduce

  At the 5-year anniversary investors receive a 10% basis step-up on their original taxable gain (i.e. a gain of $100 is reduced to a gain of $90 when the deferred tax comes due).

  There are additional incentives for rural OZ investments: 30% step-up, lower substantial improvement threshold.

  Step-up doesn’t have an expiration, unlike in OZ 1.0.

• 

  Eliminate

  Investment in the QOZ Fund becomes completely free of capital gains tax after 10 years, as the basis is increased to match current Fair Market Value.

  Among other qualifications, assets in the QOZ Fund must be:

  • Put to new use or
  • Substantially improved by investing at least as much as the original purchase price

  QOZ Fund must invest at least 90% of its assets in a QOZ.

Defer

Investors may defer the payment of capital gains by rolling realized gains into a Qualified Opportunity Zone ("QOZ") Fund. Under the current Opportunity Zone program, eligible gains invested in a QOZ Fund may be deferred until December 31, 2026.

Capital gains generally need to be invested in the QOZ Fund within 180 days of the sale or transaction that generated the capital gain. Beginning January 1, 2027, OZ 2.0 introduces a new rolling five-year deferral period for eligible gains invested in QOF, replacing the current fixed deferral deadline and creating a renewed planning window for investors.

Reduce

At the 5-year anniversary investors receive a 10% basis step-up on their original taxable gain (i.e. a gain of $100 is reduced to a gain of $90 when the deferred tax comes due).

There are additional incentives for rural OZ investments: 30% step-up, lower substantial improvement threshold.

Step-up doesn’t have an expiration, unlike in OZ 1.0.

Eliminate

Investment in the QOZ Fund becomes completely free of capital gains tax after 10 years, as the basis is increased to match current Fair Market Value.

Among other qualifications, assets in the QOZ Fund must be:

• Put to new use or
• Substantially improved by investing at least as much as the original purchase price

QOZ Fund must invest at least 90% of its assets in a QOZ.