Qualified Opportunity Zone
A designated low-income community offering capital gains tax deferral and exclusion for long-term investors.
What is Opportunity Zone?
A qualified opportunity zone (QOZ) is a census tract designated by the U.S. Treasury as economically distressed, in which investment through a Qualified Opportunity Fund (QOF) qualifies for capital gains tax incentives under IRC Sections 1400Z-1 and 1400Z-2, enacted by the Tax Cuts and Jobs Act of 2017. Investors who reinvest eligible capital gains into a QOF within 180 days can defer recognizing those gains until December 31, 2026 (or earlier sale). If the QOF investment is held for at least 10 years, any appreciation on the QOF investment itself is permanently excluded from capital gains tax.
Example
An investor sells appreciated stock for a $500,000 capital gain in June 2024 and rolls it into a Qualified Opportunity Fund within 180 days. The original $500,000 gain is deferred until December 2026. If the QOF investment grows to $800,000 by 2034 (10-year hold), the $300,000 of new QOF appreciation is permanently excluded from capital gains tax.