If you’re looking to reduce capital gains taxes while making a long-term investment, Opportunity Zones may sound appealing. These zones were created to attract capital to underdeveloped areas by offering investors significant tax incentives. While the potential benefits are real, it’s important to understand the legal and tax rules that come with these investments. At Jones, Gregg, Creehan & Gerace, we help clients weigh those benefits against the requirements so they can make informed decisions.
What Qualifies as an Opportunity Zone Investment?
To take advantage of Opportunity Zone tax incentives, your investment must meet several legal qualifications. First, your capital must be invested through a Qualified Opportunity Fund (QOF), which is a corporation or partnership that holds at least 90% of its assets in qualified Opportunity Zone property. You cannot invest directly in the property or business without this structure.
Qualified Opportunity Zone property can include:
- Real estate located in a designated Opportunity Zone
- Equity in a business that operates primarily in the zone
- Tangible property used in a trade or business within the zone
There are also specific timeframes you must meet. For example, capital gains must generally be reinvested into a QOF within 180 days of the sale that triggered the gain. We guide our clients through each step of the qualification process to help them avoid missteps.
Understanding the Tax Benefits
The tax benefits associated with Opportunity Zone investments are designed to encourage long-term commitments. There are three main advantages to consider:
- Deferral of capital gains: If you reinvest gains into a QOF, you can defer taxes on those gains until the earliest of the date you sell your QOF investment or December 31, 2026.
- Reduction in capital gains: If you hold the QOF investment for five or more years, you may receive a partial exclusion of the deferred gain. (Note: the window to achieve this benefit is closing as we approach the 2026 deadline.)
- No tax on future appreciation: If you hold the QOF investment for 10 years or longer, any gain from that investment’s appreciation can be excluded from federal income tax.
These benefits can be significant, but they’re tied to how long you hold the investment and whether you meet the proper reporting and compliance standards.
Timing and Compliance: What You Need to Know
Opportunity Zone investments come with built-in timelines and reporting obligations. Missing a key date or failing to meet requirements could mean losing the associated tax benefits.
Here are a few of the timing and compliance rules to keep in mind:
- Your capital gain must be invested in a QOF within 180 days of the triggering event.
- The QOF must meet the 90% asset test, ensuring it continues to hold a significant portion of assets in Opportunity Zone property.
- Investors and fund managers must file IRS Form 8996 to certify the QOF and report annually on compliance.
These obligations require careful attention. Our firm can help you track timelines and fulfill your reporting requirements so you stay in good standing.
Looking Beyond Tax Incentives: Is It a Good Investment?
It’s easy to focus on the tax perks, but those benefits don’t guarantee success. You still need to evaluate the underlying investment just as you would in any other context.
We help clients think through questions like:
- Is the real estate or business located in a growing area with demand?
- Does the business model have long-term potential?
- Are you comfortable tying up your capital for 10 years or more?
A well-structured Opportunity Zone investment can offer both tax advantages and growth potential, but it takes careful planning. That includes reviewing property valuations, projected income, financing structures, and management teams. We bring a practical eye to every Opportunity Zone investment, ensuring the deal makes sense on all levels.
How We Can Support Your Investment Goals
At Jones, Gregg, Creehan & Gerace, we work with investors, developers, and business owners throughout Pennsylvania who are considering Opportunity Zone investments. Our role includes:
- Reviewing and structuring Qualified Opportunity Funds
- Coordinating with your tax advisor or CPA
- Drafting operating agreements and related documents
- Ensuring compliance with IRS and legal requirements
We take the time to understand your goals and help you build a structure that balances tax benefits with smart financial decision-making.
Contact an Experienced Pittsburgh Business Law Attorney
Whether you’re just exploring your options or ready to move forward with an Opportunity Zone investment, Jones, Gregg, Creehan & Gerace will guide you through the legal and tax considerations that matter most. Our goal is to help you protect your investment, stay compliant, and take full advantage of available tax incentives. Contact us to schedule a consultation. We’re here to help you make confident, well-informed decisions.