Opportunity zones are economically distressed communities that have been designated by states and certified by the U.S. Treasury, where new investments may be eligible for preferential tax treatment. The purpose of opportunity zones is to spur economic development and job creation in these areas by providing tax incentives for investors. When taxpayers invest eligible capital gains in Qualified Opportunity Funds that, in turn, invest in businesses or property located within opportunity zones, they can defer, reduce, or even eliminate certain federal capital gains taxes, depending on how long the investment is held. This program was created by the Tax Cuts and Jobs Act of 2017 to encourage long-term investment and revitalization in low-income communities and was set to expire on 12/31/28.
The 2025 Tax Act establishes a permanent opportunity zone policy and maintains and enhances the core incentives for investments in Opportunity Zones, preserving the ability for taxpayers to elect deferral of capital gains by investing in Qualified Opportunity Funds.
