An Overview
If you invested in a Qualified Opportunity Fund (QOF) under the original Opportunity Zone (OZ) program, a major tax deadline is approaching. Deferred gains from “OZ 1.0” investments become taxable on December 31, 2026, whether or not an investment has been sold. For many investors, that could create what is known as a “phantom income” event and a tax bill tied to income they have not received.
Proactive planning before year-end, valuation, and timing will play an important role.
How to Start Planning
Now is the time to evaluate strategies that could help offset, manage, or prepare for the 2026 inclusion event. These may include:
- Loss harvesting
- Cost segregation on non-OZ assets
- Charitable planning
- Revised estimated payments
- State sourcing analysis if a relocation occurred after deferring the original gain
What’s Next?
The end of the OZ 1.0 deferral gains period is a fixed deadline with real tax consequences, but early planning can create more flexibility. Many of the most valuable strategies take time to evaluate and implement, so starting now can help you make informed decisions before year-end 2026.
Aprio’s tax advisors can help you understand how the inclusion event may affect you, identify available planning opportunities, and prepare for what lies ahead.