The short version
Congress created Opportunity Zones in 2017 to move private money into areas that need it. The deal is simple. You sell something at a gain. Instead of paying the tax right away, you reinvest the gain into a fund that builds or buys in one of these areas. In return, the tax code gives you three breaks: more time to pay the tax on that gain, a smaller bill if you hold long enough, and no federal capital gains tax on the investment's growth after ten years (IRC §1400Z-2).
People tend to file it under real estate. Ashley pushes back: "OZs are not a real estate program. They're a business program that real estate people found first." A fund can hold an operating business as well as a building.
The zone itself is a census tract. That is the same small neighborhood unit the Census Bureau uses to count people. There is nothing to apply for as a property owner. A tract is on the certified list, or it isn't. You can check any address on our Opportunity Zone map.
How it works, step by step
- You sell an asset, such as stock, a business, or real estate, and realize a capital gain.
- Within 180 days, you invest that gain into a Qualified Opportunity Fund. The fund is a partnership or corporation set up for this purpose.
- The fund puts the money into property or a business located inside an Opportunity Zone.
- You elect the deferral on your tax return, and your tax preparer reports the investment each year while you hold it.
- You hold. The longer you hold, the bigger the benefit.
Only the gain needs to go in. You keep your original basis. If you put in more than the gain, the extra money is treated like any other investment.
How the zones get chosen
Each state's governor nominates tracts from a list of eligible low-income areas, and the Treasury certifies them (IRC §1400Z-1). The first round was picked in 2018, and about 8,700 tracts made the cut.
The 2025 tax law, Public Law 119-21, made the program permanent and set up a new round of zones every ten years. The eligibility test got stricter. A tract now generally needs a median family income at or below 70% of the area median, down from 80%, or a poverty rate of at least 20% with median family income at or below 125% of the area median. Tracts that only qualified because they bordered a low-income area are no longer allowed.
The 2018 zones and the new 2027 zones
The new map, often called OZ 2.0, takes effect January 1, 2027 and runs through December 31, 2036. States filed their nominations in 2026, and Treasury certifies them on a rolling basis.
The original 2018 designations formally stay on the books through December 31, 2028 (December 31, 2027 in Puerto Rico). In practice, Notice 2026-40 says the IRS intends to propose rules that limit new money going into a 2018 tract that was not renominated. Under those rules, a project there generally needs a written working capital plan in place by December 31, 2026, with at least 10% of the planned capital received and 5% spent. These rules come from IRS Notice 2026-40, which describes regulations the IRS plans to propose. Confirm the current status with your advisor before acting. If you are looking at a property today, check both maps before you commit. And keep Ashley's warning in mind when you see the eligibility maps: "Eligible does not mean designated."
Is it right for you
A zone is a tax wrapper, not a deal. The tax break makes a good project better. It does not fix a bad one. Start with the investment itself, then ask if the Opportunity Zone rules fit your timeline and your gain. Ashley's shorthand for a project that works on both counts: doing well by doing good. If you have a recent sale and want to know where you stand, book a free 15-minute call and we will look at your dates with you.