What does it mean if a property is in an Opportunity Zone?

If your property sits within a designated Opportunity Zone (OZ), it means that your location has been identified by your state or territory and certified by the U.S. Department of the Treasury as an area in need of economic revitalization. As a result, there may be significant tax incentives available to help stimulate development or redevelopment in your neighborhood. Below is an overview of what it can mean for you as a property owner or developer.

Not sure if your property is located within an OZ? Click here to use our Opportunity Zones map.

Access to Capital

Investors who have recently triggered capital gains from the sale of assets (such as stocks, real estate, or businesses) can defer and potentially reduce their tax liability by reinvesting those gains into a Qualified Opportunity Fund (QOF). Because QOFs are specifically designed to deploy capital into Opportunity Zone projects, your property might attract attention from investors looking for a suitable place to invest. In practical terms, being located in an OZ could open up additional sources of equity funding that might otherwise be more difficult to secure.

Opportunity Zone Tax Incentives for Developers

While the tax incentives primarily benefit the investors who put money into QOFs, those benefits can also indirectly help you as a property owner or developer. For instance:

1. Improved Financing Terms: Investors can be more motivated to fund projects in OZs since they can defer and, in some cases, reduce or eliminate capital gains taxes on future appreciation. This can translate to more favorable financing or joint-venture opportunities for you.
2. Longer-Term Investment Horizons: OZ investors generally aim to hold their OZ investments for at least 10 years to maximize tax benefits. This can be advantageous if you want partners who will be more patient and committed to seeing your development through to completion and beyond.

Potential for Neighborhood Revitalization

Opportunity Zones were created to encourage economic growth in communities that could benefit from new businesses, jobs, and improved housing. If you are considering renovating or constructing new developments on your property, having it located within an OZ means you might find a wider pool of stakeholders—from government agencies to local nonprofits—interested in collaboration. These organizations often look for ways to combine public incentives (like grants or tax credits) with the OZ private investment to accelerate community uplift.

Practical Steps for Opportunity Zone Property Owners

If you own or manage property in an OZ, here are a few ways to leverage that designation:

1. Engage with Economic Development Organizations: Local or state economic development offices can offer guidance about Opportunity Zone regulations and connect you with prospective investors or funds.
2. Market Your Property Strategically: Emphasize that your project is located in an OZ. This can make it more appealing to potential buyers or JV partners who have capital gains to invest.
3. Do Your Due Diligence: Even with OZ status, it’s essential to ensure your project is fundamentally viable and aligns with local market demands. No tax incentive can fully offset a flawed business model or an unsustainable plan.
4. Consult Professionals: OZ rules can be complex. Tax and legal experts, especially those with OZ experience, can help you structure your project so investors can realize the available tax benefits.

Conclusion

Having a property in an Opportunity Zone offers unique possibilities for attracting investment and bringing new life to your community. While the program’s rules can be intricate, the potential reward—both financially and in terms of neighborhood revitalization—can be well worth the effort. By combining a sound development strategy with the OZ tax benefits, you can position your project for long-term success and, in the process, help transform your area into a more vibrant and prosperous place.