How Wealth Managers Can Utilize OZs for Business Development

Wealth managers can play a critical role in helping clients strategically diversify their portfolios and build long-term wealth through Opportunity Zone (OZ) investing. By reinvesting eligible capital gains into Qualified Opportunity Funds (QOFs), clients can defer immediate tax liabilities, potentially eliminate taxes on future appreciation, and gain exposure to institutional-quality real estate—an asset class that can complement traditional equity and fixed income holdings.

OZ investing not only offers significant tax advantages, but also aligns with goals around portfolio diversification, wealth preservation, and impact investing. For clients with concentrated gains from public markets, business sales, or other liquidity events, OZs present a timely opportunity to reposition capital into tax-advantaged, income-generating assets.

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.