Tax Incentives on Opportunity Zones Sunset in 2026, But There Is Still Time to Invest

Qualified Opportunity Zones (QOZs) were created by Congress in the 2017 Tax Cuts and Jobs Act to spur investment into distressed communities around the country. Investors are allowed to place capital gains from the sale of stocks, real estate or businesses into OZ funds without having to pay taxes on those capital gains. This is an investment strategy similar to 1031 exchanges except OZs allow the elimination of tax obligation whereas 1031s only defer tax obligations.

If the investment is held for five years, a 10% exclusion of the deferred gain is realized; after 7 years that exclusion increases to 15%. After holding the investment in the fund for 10 or more years, the investor can realize a benefit of paying no taxes on the investment.

Seven years into the 2017 Act, what do investors, future investors and potential land holders in QOZ areas need to know now, and is it still a wise investment?

While one of the bigger benefits of investing in OZ funds expired at the end of 2021 (the ability to qualify for a 10 percent step-up in investment), the opportunity provided in the 2017 Tax Cuts and Jobs Act is still beneficial. The tax cut incentive has gained traction slowly, but 2022 marked the strongest year for OZ investment since its inception. Through 2026, investors can still access OZ incentives with no capital gains taxation if they hold the investment for at least a decade. The 2017 Tax Cuts and Jobs Act was designed with a 10-year lifespan and will sunset on December 31, 2026. Investing in Opportunity Zones is a generational opportunity to improve your community and reap tax incentives, and, with the Act sunsetting in 2026, investors have a limited time to take advantage. How to get started:

To invest in an OZ, the investor must either:

Create a Qualified Opportunity Zone Fund or

Invest directly into a QOZ fund where at least 90% of the holdings are invested into businesses located within a QOZ.

OZ funds can invest in either real estate development or start-up/spin-off businesses whose primary office/place of business is located inside the boundaries of the OZ.

In West Virginia, 55 areas have been designated as Opportunity Zones over 30 counties. Regionally, parts of Morgantown, Fairmont, Clarksburg, and Grafton have been designated as OZs. Click here for a map of OZs.

In commercial real estate, there are a couple ways to invest into a QOZ. The goal of the program is to spur development into distressed communities; therefore, one cannot purchase land under the QOZ program and just sit and hold the property. A developer can purchase raw land and make improvements to the land by developing a site where a working business entity is to be located. A developer can also purchase property with existing structures but must make investment into the property to ‘significantly’ increase the value of the property; significant is defined as at least doubling the value of the property.

A popular new trend in Opportunity Zone investing is the chance to take advantage of the Act’s class of land identified as “the energy sector”. The energy sector includes fossil fuels and many designated QOZs are in areas renowned for energy production, like the Marcellus Formation in Pennsylvania.

The details of the OZ fund program are fairly extensive. Please contact us at Black Diamond Realty or call your accountant or financial planner/advisor to further discuss the benefits of the OZ program.

The properties below are Black Diamond Realty offerings that are available and located with an Opportunity Zone. Click on the addresses below to learn more about each offering.

MORGANTOWN

FAIRMONT

CLARKSBURG

GRAFTON

213 Lincoln Street

MARTINSBURG

311 Medical Court Full Flyer Coming Soon

Important Dates
June 28, 2025 – Eligible capital gains recognized in 2024 must be invested by this date.
June 28, 2026 – Eligible capital gains recognized in 2025 must be invested by this date.
December 31, 2026 – Capital gains deferral benefit on Opportunity Zones expires.
December 31, 2047 – The program is scheduled to fully sunset; after this date QOZ zones designations become inactive.

Helpful Links
IRS Website – Opportunity Zones
Map of Opportunity Zones

Tax Incentives on Opportunity Zones Sunset in 2026, But There Is Still Time to Invest

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