FAQ

Frequently Asked Questions

Are Opportunity Zones still active in 2026? Yes. But 2026 is a critical transition year. Investors who fund a QOF in 2026 are locked into OZ 1.0 rules, meaning the deferred gain is recognized on December 31, 2026 and tax is due in April 2027, with zero basis step-up. Investors who can wait until January 1, 2027 access OZ 2.0 rules, including a rolling five-year deferral and a 10% basis step-up. Compare OZ 1.0 vs OZ 2.0

Is OZ better than a 1031 exchange? Not categorically. 1031 requires rolling the full proceeds into like-kind property and does not require a 10-year hold. OZ requires only rolling the gain, has no like-kind restriction, and rewards long holds with a permanent appreciation exclusion. The right choice depends on the gain size, asset type, investment horizon, and liquidity needs. In some transactions, both strategies can be used simultaneously: 1031 on the basis, OZ on the gain. Full comparison

What is the biggest mistake investors make? Treating OZ like a tax gimmick rather than a long-duration investment structure that requires real underwriting and real sponsor diligence. The tax benefits only matter if the investment performs. A fund that fails, whether from bad underwriting, a broken capital stack, or compliance failure, delivers no tax benefit and a loss of capital. How to evaluate an OZ fund

Do all states follow federal OZ tax rules? No. California and New York do not conform to federal OZ rules. Residents of those states owe state capital gains tax in the year of sale regardless of federal deferral. Other states generally conform, but investors should verify state tax treatment with a local advisor.

What is the minimum investment for an OZ fund? Varies by fund. Most institutional multifamily OZ funds have minimums in the $100,000 to $250,000 range. The more relevant question is whether the investor's gain is large enough to justify the complexity. Gains below approximately $100,000 often do not warrant the 10-year illiquidity and compliance requirements.

What happens if the zone my fund invested in is removed from the 2027 map? Your investment is grandfathered. The tax benefits are based on the zone's designation status on the date you invested, not the current map. The redesignation does not retroactively disqualify existing investments. Transition period explained

Can a trust or entity invest in an OZ fund? Yes, but the rules around how the gain flows through and when the 180-day clock starts can be complex. Trusts, estates, S-corps, and C-corps all have specific rule sets. Consult an OZ tax attorney.

Can I buy property in a zone directly and get OZ tax benefits? Not through a direct purchase. OZ benefits flow through a Qualified Opportunity Fund (QOF), a specific investment structure. Directly owning property in a zone does not generate OZ tax treatment. What is a QOF?