Exciting news for investors and business owners: Qualified Opportunity Zones (QOZs) are back in action, thanks to a new piece of legislation called the One Big Beautiful Bill Act (OBBBA). This law permanently reauthorizes the QOZ program, with some important changes that could offer tax-saving opportunities for years to come.
If you’ve invested in Opportunity Zones in the past or you’ve been curious but hesitant, this is the time to pay attention. Over the next few months, we’ll be learning more about how these changes apply into actual investments and tax planning strategies, but here’s what you should know right now.
What Are Qualified Opportunity Zones?
Opportunity Zones were established under the Tax Cuts and Jobs Act (TCJA) to encourage long-term investment in communities in need of economic development — offering tax incentives as a key benefit.
By reinvesting capital gains into a Qualified Opportunity Fund (QOF), investors may access several valuable tax advantages, including:
• Deferral of tax on capital gains: You can defer paying tax on the capital gains you invest in a QOF.
• Reduction in taxable gain: If you hold your investment for at least five years, part of the deferred gain is excluded from tax.
• Exclusion of new gains: If you hold your investment in the QOF for at least ten years, you can exclude any gains earned on the investment itself from tax.
Previously, these benefits applied only to capital gains realized before December 31, 2026. The new OBBBA legislation has made significant changes:
1. Deferral of capital gains is now available permanently. Gains realized after 2026 qualify for deferral if invested in a QOF.
2. Recognition of deferred gains is more flexible. Instead of a fixed deadline, gains are recognized when you sell your investment or five years after investing — whichever comes first.
3. Tax benefits for holding investments have been adjusted. For investments held at least five years, a 10% step in the investments basis (30% for certain rural areas).
4. You can exclude gains on the QOF investment if held for 10 years or more, but gains accrued after 30 years are excluded from this benefit.
5. New reporting requirements and penalties have been introduced for Qualified Opportunity Funds and businesses operating in Opportunity Zones.
If you’re a business owner who has or expects to have capital gains from the sale of property, business interests, or investments, this updated law gives you a new window to reinvest those gains in a way that can significantly reduce your tax liability while supporting growth in underserved communities.
We believe there is opportunity for the private lending community to provide capital for funds and investors looking to take advantage of these new opportunities for the initial acquisition and for providing capital for the taxes coming due when the initial deferral period is up.
More guidance is expected in the coming months as the new legislation is implemented. To learn how Opportunity Zones might fit your strategy, schedule a consultation with Duner and Foote.