In short: Opportunity Zones are a federal capital-gains deferral program. The One Big Beautiful Bill Act (July 2025) made the program permanent, with new maps and rules starting January 1, 2027. Gains deferred under the old rules must be recognized no later than December 31, 2026.
How it works
After you realize a capital gain on a home, stock or other asset, you have 180 days to invest that gain in a Qualified Opportunity Fund (QOF), which invests in designated low-income census tracts. The original gain is deferred, and if you hold the fund investment for 10 years, its appreciation is free of federal capital gains tax.
Old rules vs. new rules
| Invested by December 31, 2026 (old rules) | Invested on or after January 1, 2027 (new rules) | |
|---|---|---|
| Original gain deferred until | December 31, 2026 at the latest | Five years after investing, or an earlier sale |
| Basis step-up | The 10%/15% step-ups required 5/7 years of holding by the end of 2026, so new investments can no longer qualify | 10% after five years; 30% for qualified rural opportunity funds |
| 10-year hold | Appreciation excluded from federal tax | Same, for holdings of up to 30 years |
| Which map | Zones designated in 2018, expiring at the end of 2028 | New map from 2027, redrawn every 10 years |
Invest now or wait for 2027?
Invest in the fourth quarter of 2026 under the old rules and the gain is only deferred to December 31, so the tax is due with your 2026 return a few months later. Under the 180-day window, gains realized on or after July 5, 2026 have a window that runs into 2027. Whether those gains can be invested under the new rules depends on Treasury's final transition rules, so confirm with your CPA first.
For California investors
- California does not currently conform to the federal Opportunity Zone benefits, so the gain is still subject to state tax. GO-Biz's 2026 FAQ says the state has not discussed state-level conforming incentives for OZ 2.0.
- California has 2,469 eligible census tracts and the Governor may nominate up to 618. The draft list was published in August and was due to Treasury on September 28; the national nomination deadline has since been extended to October 28. Which Los Angeles County tracts are included depends on the final list effective in 2027.
- Real estate in a zone must be substantially improved: for an existing building, improvements within 30 months must at least equal the building portion of the purchase price (50% in rural zones).
How this differs from a 1031 exchange
A 1031 exchange only covers gains from selling real estate and requires reinvesting the full sale proceeds into like-kind property. An Opportunity Zone investment only needs the gain itself, and gains from stock or a business also qualify.
How Aspire LaShine can help
We can help you find property in Opportunity Zones, handle leasing and property management, and arrange DSCR financing. For tax structure and fund selection, work with a CPA or tax attorney. Questions? Contact our team.
Sources
- IRS Notice 2026-40 (Treasury/IRS, June 25, 2026)
- California GO-Biz, “Opportunity Zones 2.0 in California” FAQ
General information only, not tax or legal advice. Information as of October 2026.
