What Are They Anyway? 

Introduced under the Tax Cuts and Jobs Act of 2017, the Opportunity Zone program is an economic development and revitalization program. The idea behind the program is that capital gains from the sale of investment assets are channeled toward lower-income, federally designated Qualified Opportunity Zones (QOZs).

Qualified Opportunity Funds (QOFs) are partnerships or corporations with the sole purpose of investing in Opportunity Zones – this is where investors put their money. QOFs act as a medium for investors to receive tax benefits, including:

The regulations for investing in the Opportunity Zone program can be complex, and this type of investing carries a different risk profile from other property investments, like DSTs.

In 2017, each state's governor identified up to 25% of the state’s census tracts that met certain criteria to be designated as a QOZ. The program is designed to serve particular community needs.

How were QOZs created?

Qualified Opportunity Zones were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017.

What kinds of gains are eligible for deferral if I invest in an opportunity zone? 

Eligible gains include both capital gains and qualified 1231 gains, but only those that would be recognized for federal income tax purposes before January 1, 2027.

What is the purpose of a QOZ? 

QOZs are an economic development tool, designed to boost economic development and job opportunities in distressed communities, per each state’s unique situation.

When do I have to invest in a Qualified Opportunity Fund to qualify for the tax incentives? 

You’ll generally have 180 days to invest an eligible gain in a QOF, with the first day of the period beginning the date the gain would be recognized for federal income tax purposes if you didn’t defer.

Do I need to live in a QOZ to benefit from the tax advantages? 

No, the tax advantages are available to investors, even if they do not live, work or have existing business in a QOZ.

What ends the QOZ deferral? 

You must recognize the remaining deferred gain on the earlier of an inclusion event or by December 31, 2026.