Opportunity Zone news and insights

Here Are the Opportunity Zone Tax Changes Investors Must Know

By Blake Christian, CPA, MBT, and Abi Yanke

More than $100 billion of capital gains has gone into Qualified Opportunity Funds since 2017. With OZ 1.0 deferrals ending on December 31, 2026 and OZ 2.0 starting January 1, 2027, investors and sponsors have three planning jobs right now.

Key takeaways

• Plan for the December 31 inclusionOZ 1.0 investors report deferred gain at year end, measured as the lower of the deferred gain or the investment's fair market value. Secure valuations now, and remember the 15% basis increase for investments made by the end of 2019, or 10% for 2020 and 2021.
• Line up gains for OZ 2.0Identify eligible 2026 gains and the funding date each one allows. With the 180-day window, and the year-end option for pass-through owners, some 2026 gains can be invested in 2027 under the more valuable OZ 2.0 rules.
• Mind the Notice 2026-40 cutoffsProperty acquired after December 31, 2026 generally won't qualify in an OZ 1.0 zone, with limited exceptions. Unfinished projects should update plans and meet the funding and spending thresholds, and the 2026 "Deemed Included Gain" can't be rolled into another fund.
• Know what OZ 2.0 offersA rolling five-year deferral, a 10% basis increase (30% for qualified rural funds), a 50% substantial improvement threshold for rural projects, and the long-term exclusion on appreciation.

Summary prepared by OZ Intel Pro. Also published in Accounting Today as "Opportunity Zone 1.0 begins expiration process at year-end." The full article may require a subscription.