When Do Opportunity Zones Expire? Important Deadlines

The Opportunity Zone program, established by the Tax Cuts and Jobs Act of 2017, offers tax incentives for long-term investments in low-income communities. Investors can defer tax on prior capital gains by reinvesting them into a Qualified Opportunity Fund (QOF), an investment vehicle holding at least 90% of its assets in a designated Opportunity Zone. The program’s expiration is not a single event but a series of milestones that impact different aspects of the investment. While some benefits have passed, others remain available for years to come.

The End of the Tax Deferral Period

The first deadline for Opportunity Zone investors is December 31, 2026, when the temporary tax deferral on the original invested capital gain ends. Any investor who rolled over gains into a QOF will have a tax liability on that initial amount, which must be recognized on their 2026 tax return. The character of the gain remains the same; a deferred short-term capital gain will be taxed as a short-term gain.

The original program offered a basis step-up that reduced the amount of the deferred gain to be taxed. A 10% basis step-up was available for investments held for at least five years, and a total of 15% was available for investments held for seven years. To receive the 15% reduction, an investor needed to place capital in a QOF by the end of 2019. The deadline to qualify for the 10% reduction required an investment by the end of 2021.

These basis step-up benefits are no longer attainable for new investors, as any investment made after December 31, 2021, will not meet the five-year holding requirement before the 2026 deadline. Investors entering the program now will be liable for tax on the full amount of their deferred gain. The primary benefits remaining are the tax deferral until 2026 and the potential for tax-free growth on the new investment.

Expiration of Opportunity Zone Designations

Another deadline concerns the Opportunity Zones themselves. The official designation for the more than 8,700 census tracts as Qualified Opportunity Zones is set to expire on December 31, 2028. This date signifies the end of the program’s geographic component, meaning no new zones can be designated and existing ones will lose their special status.

The expiration of zone designations does not invalidate existing investments. A QOF that was properly established and funded before the 2028 deadline can continue to operate, and its assets are still considered qualified property for tax benefits. An investor who made a qualifying investment before the zones expire remains eligible for the program’s incentives.

The primary impact of the 2028 expiration is on establishing new funds. After this date, it will no longer be possible to create new QOFs that acquire property within these zones to receive tax benefits. An investor’s path to long-term advantages is not cut off by this expiration, provided their investment was made in a timely manner.

The Final Horizon for Tax-Free Growth

A primary benefit of the Opportunity Zone program is the permanent exclusion of capital gains tax on the appreciation of the QOF investment itself. To qualify, an investor must hold their interest in the QOF for a minimum of 10 years. Upon selling the investment after this 10-year holding period, an investor can step up the basis to its fair market value, effectively eliminating federal capital gains tax on the growth.

The program has a final deadline of December 31, 2047, the last day an investor can sell their QOF investment and receive this tax-free growth benefit. This timeline provides a window for investments to mature. For example, an investor who realizes a capital gain in late 2026 has until mid-2027 to invest it into a QOF. To meet the 10-year holding requirement, they would need to hold that investment until at least mid-2037.

This 2047 end date provides clarity for the program. It allows even the latest investors to hold their assets for well over the 10-year minimum, while still qualifying for the elimination of capital gains tax on the investment’s appreciation. This long-term view is fundamental to the program’s design, which aims to foster patient capital in developing communities.