Opportunity Zones: A Changing Landscape and How to Navigate into the 2.0 Regime

Opportunity Zones: A Changing Landscape and How to Navigate into the 2.0 Regime

Tucked inside the sweeping One Big Beautiful Bill (BBB), signed on July 4, 2025, was a quiet but consequential shift: Opportunity Zones (OZs) are no longer operating on borrowed time. Once a temporary provision, OZ incentives have been rejuvenated and locked into the tax code, offering long-range planning potential for investors and advisors alike.

There is one catch. While it’s fair to call BBB a “permanent extension,” it’s more precise to view it as a complete overhaul, effectively creating OZs 2.0. That means OZ 1.0 closes to new investors on December 31, 2026, and OZ 2.0 officially launches on January 1, 2027. Certain investors with gains realized in 2026 may be able to choose between Qualified Opportunity Funds (QOFs) under either version.

How the Two Versions Compare

To make sense of the changes, it helps to see OZ 1.0 and OZ 2.0 side-by-side. The chart below highlights the major differences at a glance. In the following sections, we’ll walk through each point in more detail.

To make sense of the changes, it helps to see OZ 1.0 and OZ 2.0 side-by-side. The chart below highlights the major differences at a glance. In the following sections, we’ll walk through each point in more detail.

Breaking Down the Changes

Program status - OZ 1.0 stops accepting new capital after 12/31/26, which creates a clear deadline for investors who prefer its structure. Opening to new investors on 1/1/2027, OZ 2.0 removes the sunset clause, allowing for long-term planning without the fear of sudden legislative expiry, and will be available for gains realized in 2026 if they meet the 180-day investment window rules.

Tax deferral - Under OZ 1.0, all deferred gains are recognized by the end of 2026. OZ 2.0 ties deferrals to the date of each investment, creating a personal 5-year rolling deferral unless the asset is sold earlier.

Qualified Rural OZ Funds (QROFs) - A new category in OZ 2.0 designed to channel capital into rural areas. QROFs offer enhanced benefits, including a higher basis step-up and a lower improvement threshold, to encourage projects in less densely populated regions with unique growth potential.

Step-up in basis - OZ 1.0’s five- and seven-year minimum-hold step-up provisions expired as the program neared its 2026 deadline. OZ 2.0 sets rolling 5-year minimum holds for a 10% step-up in standard QOFs, and grants QROFs a 30% step-up to further incentivize rural development.

Tract eligibility- OZ 2.0 tightens the median income threshold from ≤80% to ≤70% of state median income, which may change where projects are located and focus capital in more targeted areas.

180-day investment window - The familiar timing rule remains intact, with flexibility for partnerships, S-Corps, and certain trusts that can choose alternate start dates tied to tax filings or elections.

Improvement threshold - OZ 2.0 maintains the 100% improvement requirement for standard QOF projects but lowers it to 50% for QROFs, reducing capital demands for eligibility.

Bonus depreciation - A new 2.0 advantage, but with a built-in deadline. Projects must be placed in service by December 31, 2030, to qualify, adding a layer of urgency for development-heavy strategies.

What This Means for Investors and Advisors

For investors with gains today, OZ 1.0 still offers valuable benefits, especially for quick deployment, supported by $1.6 billion in YTD capital raised as of 6/30/25. For gains that can be timed into 2026, the ability to choose between OZ 1.0 and 2.0 may allow for optimal alignment with planning goals.

From 2027 onward, OZ 2.0’s rolling benefit structure and rural incentives will expand options for tax-efficient investing. But even a “permanent” program has deadlines: the bonus depreciation provision is set to expire at the end of 2030.

For Today and Tomorrow

Opportunity Zones 2.0 changes the playing field. Whether you’re an investor seeking to defer taxes or an advisor guiding clients through complex transactions, understanding the distinctions between 1.0 and 2.0 is critical to capturing the right benefits at the right time. While we’ve discussed high-level changes, there is far more beneath the surface that can materially impact results. Just as important as knowing the rules is applying rigorous due diligence to sponsors and projects. The structure and execution of each offering, especially under new rules, can make the difference between meeting expectations and falling short.

To learn more, set a discovery call with the proven experts at RCX, who combine technical knowledge with a track record of competency in evaluating QOF sponsors and projects.

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This site provides brief and general description of certain tax strategies including Opportunity Zones, Sections 1031, 1033, and 721 Exchanges. There are various risks related to purchasing securities as part of any planning strategy, including tax complexity, illiquidity and restrictions on ownership and transfer. RCX Capital Group and its representatives do not provide Tax Advice. Because each prospective investor’s tax implications are different, all prospective investors should consult with their tax advisors.