Permanent Opportunity Zone 2.0 program offers 180-day gain deferral for 2026 and 30% rural step-up; advisors and developers launch funds ahead of 2027 start.
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Financial advisors and commercial real estate developers are stepping up preparations for the permanent Opportunity Zone 2.0 program after the IRS issued guidance that gives investors a 180-day window to defer capital gains realized in the second half of 2026. The program becomes fully effective January 2027, but the clock for state nominations started July 1, kicking off a 90-day period for governors to designate eligible census tracts.
New IRS rules also allow investors to defer K-1 gains reported in 2026, providing a bridge into 2027 when OZ 2.0 formally launches, said Peter Ciganik, a partner at GTIS, a New York-based real estate investment firm. “We have seen a significant pickup in interest from investors who are starting to look at their 2026 capital gains that can be deployed in the new Opportunity Zone program,” Ciganik wrote. He noted that some are familiar with the original OZ program, while many are considering it for the first time because of the enhanced tax benefits. OZ 2.0 offers a five-year rolling deferral period and an automatic 10% tax reduction after five years. For investments in rural Opportunity Zones, the deferred tax amount can be reduced by 30% – up from the old program’s maximum 15% step-up after seven years.
The program’s permanence addresses a key drawback of the original 2017 version, which had a looming sunset. William Connor, a partner at SAX Advisors, an RIA with about $5 billion in assets under management serving high-net-worth clients, said many of his clients have liquidity events before year-end and are discussing OZ 2.0 as a reinvestment option. “With this new legislation piquing people’s interest, I am not having a lot of inbound calls right now, but I am certainly talking to a lot of clients who have upcoming liquidity events, and the increasing knowledge of what Opportunity Zones 2.0 are, it’s getting people [to discuss] it again as an idea,” Connor said. He argued the permanent status lets clients treat OZs as part of a diversified portfolio rather than as single-asset development bets, which carried heightened risk when interest rates climbed after 2017. The program’s evergreen nature, he said, gives sponsors more flexibility to handle rate shocks.
Connor also highlighted the 30% basis step-up on deferred gains for rural zones. The old program capped the step-up at 15% after a seven-year hold. He said that change makes rural OZ investments significantly more attractive.
Some developers are acting before the final tract nominations are submitted. In late April, Chicago-based Peakline Real Estate Funds launched its Peakline Real Estate Qualified Opportunity Zone Fund IV, targeting $1.3 billion in equity commitments. The fund splits into a metro fund, focused on multifamily and infill industrial assets in high-density areas, and a rural fund targeting lower-density residential, industrial and energy infrastructure. Peakline opened the fund to investors without knowing which zones would be designated, expecting capital deployment to start only in January 2027. Michael Miller, co-founder of Peakline, told CoStar News the firm expects new tract designations to align with its existing landholdings. He also cited anticipated investor interest from capital gains generated by the SpaceX and Anthropic IPOs.
The nomination period for state governors runs through late September. Final census-tract designations are expected this fall. The program goes into effect Jan. 1, 2027.
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