Have you heard that the Opportunity Zone (OZ) program is set to expire in 2026? That’s only part of the story, and believing otherwise could cost you.
Initially, OZ provisions established a deadline of Dec. 31, 2026. Under the One Big Beautiful Bill Act (OBBBA), the program is now permanent. OZ investments of 2026 capital gains eligible to be invested in 2027 still qualify under the new rules. If you invest eligible gains after Dec. 31, 2026, you can take advantage of a five-year deferral and 10% basis step-up. By contrast, gains invested on or before Dec. 31, 2026, are deferred only until the end of that year and receive no basis increase. For real estate investors considering OZ investments, timing is everything. Understanding the 180-day investment window and planning now can put you in the best position to capture gains and avoid last-minute rushes.
Waiting Could Cost You
A common misconception is that it’s best to wait until 2027 to act. In reality, timing is crucial, and delaying could hurt you. If your general 180-day window extends into 2027, you can reinvest those gains into a Qualified Opportunity Zone Fund (QOZF) under the new rules. With proper planning, you can invest without rushing and keep your options open. Special rules apply to gains realized by partnerships and S corporations. If you hold an interest in these flow-through entities, your 180-day window may not start until as late as Mar. 15, 2027. That means a gain realized by the flow-through entity as early as Jan. 1, 2026, could still be invested in a QOZF as late as September 2027.
By acting earlier, you can:
- Decide when and how to exit investments
- Prevent a last-minute rush of buyers and sellers
- Align tax savings with your overall investment plan, not just the calendar year
Don’t Overlook New Rural Opportunities
The OBBBA has expanded OZ incentives to include Qualified Rural Opportunity Funds (QROFs). These funds target investments in rural areas and offer additional tax benefits beyond standard QOZ advantages. Investing in rural properties might offer:
- Lower acquisition costs
- Significant growth potential in emerging areas
- Extra gain exclusions not available with standard QOZ investments
Identifying these properties now could lead to bigger gains after 2026, but rural investments face specific hurdles. It’s easy to overlook local market quirks, underestimate infrastructure needs, or misjudge the time needed for development approvals. Identifying these risks early can help you avoid costly mistakes and position your OZ investments for success.
Your Action Plan
To maximize the benefits of the updated OZ program, consider these steps:
- Identify assets to sell in 2026 whose 180-day window will extend into 2027
- Create a shortlist of QOZ and QROF investments that align with your goals
- Engage tax, legal, and investment advisors early
- Decide whether to invest in existing funds or launch your own
The Bottom Line
The new OZ rules give you more time, but also require careful planning. Acting early can help you maximize tax savings, avoid rushed decisions, and build a stronger investment strategy. Our real estate tax team can help you coordinate sales, reinvestment strategies, and OZ opportunities so every day counts before your deadline. Contact us to start your plan today.
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