Skip to main content

Site Navigation

Site Search

global Tax

What’s New with Opportunity Zones?

May 24, 2022

Opportunity zones are a great way to invest in your community while saving tax. If you have not yet taken advantage of the OZ program, you will want to read up on the benefits and what’s new in 2022.

Have you taken advantage of the opportunity zone program yet? The Tax Cuts and Jobs Act (TCJA) enacted in December 2017 introduced an investment vehicle, known as opportunity zones (OZ), which allow taxpayers to invest in their communities while saving taxes. Although the December 31, 2021 funding deadline has passed, there are still ways the OZ program can benefit you. We have the details here.

What is an opportunity zone?

Opportunity zones are designed to spur economic development and job creation in struggling communities. Governors in every state designate opportunity zones that are deemed economically distressed, so investments in these zones are potentially eligible for preferential tax treatment.

If you timely invest capital gains into a qualified opportunity zone fund (QOF), you may be able to defer or eliminate the tax that would come with the sale of your current investments. An OZ investment generally needs to be made within 180 days of the realization of the capital gain in order to be eligible for deferral and potential exclusion of the gain from your income.

What are the benefits?

Beyond the societal benefits (including home price appreciation, job growth and economic development), investing in opportunity zones provides two key tax benefits:

  1. Capital gain deferral- Under Code Section 1400Z, Special Rules for Capital Gains Invested in Opportunity Zones, investors can reinvest their capital gains from other investments into Opportunity Zone Funds. Instead of paying tax on capital gains in April following the year of sale with their return, they can pay the tax at the earlier of the date they sell their OZ investment or December 31, 2026.
  2. Tax-exempt growth- As time goes by, investors get preferable tax treatment on the appreciation from these new investments, and after 10 years, any potential capital gains on the appreciation are tax free.

What’s new in 2022?

Although the forgiveness from basis step-up is no longer available, you can still invest in a QOF before the end of 2026 and hold that investment for 10 years.

A bi-partisan OZ bill was introduced last month and is intended to address multiple issues in the original OZ Act. The Bill is entitled the "Opportunity Zones Transparency, Extension and Improvement Act" and has the goal of expanding and extending the potential OZ benefits to taxpayers.

Please check back for our next blog on the key provisions of the new bill. There is still time to get started with opportunity zones! We can help. Contact us.

Stay informed. Get all the latest news delivered straight to your inbox.

Also in Tax Blog

up arrow Scroll to Top