Business Owners

Business owners who have recently sold or are planning to sell their business can take advantage of Opportunity Zone investing to significantly reduce their capital gains tax burden while reinvesting in long-term, tax-advantaged growth. By rolling eligible capital gains from the sale into a Qualified Opportunity Fund (QOF) within 180 days, they can defer taxes on those gains until 2027.

More importantly, if the Opportunity Zone investment is held for at least 10 years, any appreciation on that new investment can be entirely excluded from capital gains tax. This provides a unique opportunity for business owners to transition wealth from an active business into passive, tax-efficient investments, often in real estate or operating businesses located in economically emerging communities.

About the Opportunity Zone Program

Qualified Opportunity Zones (OZ) were created as part of the Tax Cuts and Jobs Act of 2017. These zones were designed to spur economic development and job creation in communities throughout the country by providing tax benefits to investors with eligible capital gains. The OZ program incentivizes long-term investment to revitalize underserved, often underdeveloped communities across the U.S.

Investors have 180 days from the day the capital gains event occurs to invest into a Qualified Opportunity Zone Fund.

OZ Tax Benefits*

1. Defer Original Capital Gains Tax
Upon investment into a QOF, the tax liabilities of eligible capital gains can be deferred until the investor’s 2026 tax return, payable April 15, 2027. Importantly, investors are not required to invest the entire capital gain, they can invest all or only a portion.

2. Eliminate Taxes on OZ Investment Gains
If the investor holds the QOF investment for at least 10 years, they can exclude capital gains tax liabilities on any new gains realized from that investment.

3. No Depreciation Recapture
With OZ investments, depreciation can be used to offset ordinary income tax liabilities like traditional real estate investments. However, OZ investments are not subject to recapture tax at the terminal sale.

*These tax benefits are associated with the current OZ program (OZ 1.0), effective through 12/31/2026.