Four Reasons Why Investors Shouldn’t Wait for Opportunity Zone 2.0

By Louis Rogers, founder and co-chief executive officer, Capital Square

The recent signing of the One Big Beautiful Bill Act into law has permanently solidified opportunity zones as a key provision within the U.S. tax code, signaling a transformative era for investment in economically distressed communities. However, investors should not overlook the advantages of acting now under the current opportunity zone regime, i.e., OZ 1.0, instead of waiting for the new OZ 2.0 rules to take effect.

Here are four reasons why timing matters.

Certainty and Stability of Current Zones

The current opportunity zones, mapped in 2018, offer certainty. Investors today can evaluate existing successful zones – many with established infrastructure and ongoing projects – without the uncertainty that will accompany the new zone designations due to be unveiled at the end of 2026. For example, Richmond’s Scott’s Addition neighborhood, where Capital Square has successfully developed multiple projects, is unlikely to qualify under the tighter income criteria introduced by OZ 2.0. Investing now ensures capital deployment in established, mature communities with a proven track record of economic revitalization.

Fair Market Valuation Advantage

Under the existing OZ structure, investors have an unprecedented tax advantage through fair market valuation as of Dec. 31, 2026. This provision enables partial recognition of capital gains based on the development status of a project at that date.

Consider a hypothetical investment of $100,000 in a qualified opportunity zone fund that’s building a project that is partially complete as of Dec. 31, 2026. Assuming a qualified appraiser concludes that the fair market value of the project is only 50% of the total development costs on Dec. 31, 2026, the investor would only recognize $50,000 of taxable gain, effectively halving their immediate tax liability. Such a tax mitigation opportunity is unique and is not available after Dec. 31, 2026, under OZ 2.0.

Early Start to the 10-Year Holding Period

Investors who place capital in opportunity zones in 2026 benefit from initiating the 10-year holding period immediately, maximizing the potential for compounded returns. A single year of additional investment can significantly amplify returns over a decade-long investment horizon.

Navigating the “Dead Zone” Issue

The upcoming transition to OZ 2.0 could create a disincentive for investors holding 2026 gains – particularly partnership K-1 gains with an additional 180 days for partners to make an OZ investment. Investing now avoids uncertainty around future census tracts in OZ 2.0, allowing investors to navigate this period smoothly while securing current incentives.

In short, while OZ 2.0 offers meaningful enhancements, notably for rural and deeply distressed areas, the benefits and certainties offered by investing under OZ 1.0 – established maps, immediate tax advantages, and mature economic environments – are too substantial to overlook.

Savvy investors should seize this moment to capitalize on the existing structure. The optimal strategy is clear: act now, leverage the full benefits of Opportunity Zone 1.0, and position yourselves for substantial long-term growth and community impact.

Louis J. Rogers is the founder and co-chief executive officer of Capital Square, a leading sponsor of DST programs for Section 1031 exchanges and qualified opportunity zone funds. One of the pioneers of the securitized 1031 exchange industry, Rogers is also the author of the recently published book, “Section 1031 Exchanges: How to Swap Till Ya’ Drop, Building Family Wealth While Minimizing Taxes.”

The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of AltsWire.

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