If you've heard the term Opportunity Zone before but weren’t quite sure how it worked — or assumed the program was sunsetting — it’s time to take another look.
The One Big Beautiful Bill just gave Opportunity Zones a permanent reboot — with major enhancements for investors, communities, and rural America. Here's what you need to know.
What Are Opportunity Zones?
Opportunity Zones (OZs) are specially designated areas where investors can receive capital gains tax breaks for putting money into long-term community development projects — like real estate, small business growth, or infrastructure.
Originally created under the 2017 Tax Cuts and Jobs Act, OZs were set to phase out. But the new bill:
✅ Makes the program permanent
✅ Improves the incentives
✅ Adds new reporting requirements
✅ Expands the benefit for rural areas
What’s New Under the 2025 Tax Law
Recertification Every 10 Years
Opportunity Zones will now be re-evaluated every decade
The first recertification: July 1, 2026
Zones that no longer meet income or poverty criteria may be replaced with newly qualified areas
Stricter Criteria for Designation
The new law tightens the definition of what qualifies as a low-income community:
Income must be <70% of the statewide or metro median, OR
Poverty rate ≥20% and income <125% of the benchmark
Also, the rule that allowed adjacent (contiguous) tracts to be designated even if they weren’t low-income? That’s gone.
10-Year Limit on Zone Duration
Any new designation will only last for 10 years
Example: A zone designated in 2026 will remain in effect through the end of 2035
What About the Tax Benefits?
The biggest draw of Opportunity Zones has always been the tax breaks on capital gains. The new law enhances those benefits:
Shorter Deferral Period
Previously: Tax was deferred until 2026
Now: Capital gains invested in OZs are deferred for up to 5 years
New Basis Step-Up for 5-Year Hold
After holding an OZ investment for 5 years, you can exclude:
10% of your original gain, or
30% if it's a rural zone investment
The 10-Year “Forever Tax-Free” Rule Remains
After 10 years, no tax is owed on any appreciation in the OZ investment
You can now hold the investment for up to 30 years total
Special Boost for Rural Opportunity Zones
New definition of “Qualified Rural Opportunity Fund”
Rural OZs get higher basis increases (30%) and looser improvement requirements
“Rural” defined as outside cities of 50,000+ or adjacent urbanized areas
New Transparency and Reporting Rules
The old OZ rules were heavily criticized for lacking oversight. That’s been fixed:
Qualified Opportunity Funds (QOFs) must now file detailed annual reports
Reports must include:
Property values, business activity, jobs created, residential units, NAICS codes
Investor-level reporting on buy/sell dates and amounts
These rules apply to both regular and rural QOFs
These transparency rules are designed to prevent abuse and measure real economic impact, especially in housing and employment.
Why It Matters for You
If you're a:
Developer looking to revitalize a neighborhood
Investor sitting on large capital gains
Small business owner in an eligible tract
Local leader seeking to attract capital into your area
…these changes open a fresh window of opportunity.
You can now defer capital gains, potentially avoid tax on future growth, and invest in communities that need it most — all with a better reporting framework and longer planning horizon.
When Do These Changes Take Effect?
Most enhancements apply to investments made after Dec 31, 2026
Some administrative provisions (like reporting) take effect immediately
New designations begin July 1, 2026
Need Help Navigating the New OZ Rules?
We can help you:
Identify eligible zones (including new ones in 2026)
Evaluate whether your capital gains qualify
Set up or invest in a compliant Qualified Opportunity Fund
Prepare for new reporting obligations
Schedule a consultation today to explore how Opportunity Zones can support your tax strategy and community impact goals.