Using Opportunity Zones to Invest in Rural Areas While Saving Taxes

The new tax law makes permanent and expands Opportunity Zones (OZ), a program allowing investors to defer capital gains taxes if they make investments in certain low-income census tracts.

The new law — known as the One Big Beautiful Bill Act — offers benefits for investing in low-income rural areas. Explore the new opportunities to take part in rural revitalization along with the other new benefits and rules for the Opportunity Zone 2.0 program.

Key Opportunity Zone provisions in the new tax law

• Opportunity zones are now permanently designated — OZs will now be designated on a rolling 10-year basis, beginning January 1, 2027
• There is now stricter eligibility for OZs. Contiguous tracts no longer qualify. Eligibility only applies for census tracts with:
  • Median family income ≤ 70% of area median income
  • Poverty rate ≥ 20% and median family income ≤ 125% of area median income
• Tax benefits are retained, including:
  • 10% basis step-up after five years
  • Deferred gain recognized on the fifth anniversary
  • Basis increase occurs before gain recognition
  • No recapture of depreciation after investment held for 10-years
  • Gain exclusion available for QOF held > 10 years; however, post-year 30 appreciation taxable when recognized.
• New Qualified Rural Opportunity Funds (QROFs):
  • The funds must invest 90% in rural OZs
  • Investors receive a 30% basis step-up after 5-years (triple the standard)
  • The substantial improvement threshold is reduced to 50%
• New transparency and reporting:
  • Treasury must publish annual and periodic reports on OZ performance
  • New IRS funding supports compliance and enforcement

Creating pathways to prosperity through new rural Opportunity Zones

The newly enacted OZ 2.0 legislation allows investors to pair wealth creation and community transformation — especially in rural America, where investment has historically lagged.

With permanent status and 10-year redesignation cycles, the OZ program is now a cornerstone of U.S. economic development policy. Through the end of 2022 alone, $89 billion in qualifying equity investments were made across over 5,600 low-income neighborhoods. Research finds OZ designations have a large and immediate effect on development activity, with positive spillovers to neighboring non-designated tracts. 

OZ 2.0 investments can support a wide range of community needs, including affordable housing, infrastructure upgrades, and small business development. These investments not only offer tax advantages but also create meaningful impact in areas that need it most.

The new Qualified Rural Opportunity Funds offer a 30% basis step-up — triple the standard benefit — and reduce the substantial improvement requirement from 100% to 50%. These enhancements are designed to attract capital to rural areas and unlock new opportunities for revitalization and growth.

Align your investment strategies with these community-focused incentives. 

Begin preparing now by evaluating projects meeting the new eligibility criteria and planning for the January 1, 2027, start date. Forming or participating in Qualified Rural Opportunity Funds is a strategic way to use the enhanced 30% basis step-up and reduced improvement thresholds available in rural OZs.

Experienced Opportunity Zone advisors can help you identify projects that can create lasting value in places you care about. You can also get help identifying, structuring, and managing OZ investments. Advisors can also assist with fund formation and compliance.

Navigating the Opportunity Zone transition period

The law includes a transition period to allow for gains deferred under OZ 1.0 to be recognized in 2026. Investors with deferred gains from the first program cannot roll those gains into the new program. The first date for eligible new investment under the new rules is January 1, 2027.

This creates a temporary “dead zone” where investors may delay activity to wait for the updated provisions. Strategic planning is essential to navigate this period effectively.

What the new Opportunity Zone rules mean for real estate investors

The updated OZ framework presents both new opportunities and added complexity for real estate investors, developers, and fund managers — especially those focused on rural markets. Enhanced tax incentives and reduced improvement thresholds could make certain projects more financially attractive.

However, the program introduces more rigorous compliance and reporting requirements. Investors should be prepared for a more complex regulatory environment requiring careful planning and documentation.

Steps to prepare for the new Opportunity Zones

• Evaluate your pipeline — Identify rural projects that could qualify under the new OZ criteria
• Plan for 2026 tax exposure — Deferred gains from OZ 1.0 must be recognized in 2026
• Engage advisors early — Consult with legal and tax advisors to assess how the new law affects your strategy
• Leverage specialized knowledge — Work with professionals who understand the evolving OZ landscape

How CLA can help with Opportunity Zone investments

CLA’s dedicated Opportunity Zone team is well equipped to help investors navigate these changes and take advantage of the new Opportunity Zone benefits. Our wealth advisors can strategically integrate Opportunity Zone investments with broader tax and wealth planning strategies. This collaborative approach helps investors not only achieve their financial goals but also contribute to meaningful economic growth in the communities they care about.

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Use Opportunity Zones to pair tax savings with rural reinvestment. Complete the form below to connect with CLA.