Treasury and the IRS designated 6,576 census tracts as Qualified Opportunity Zones on Thursday, November 5, 2026, in release IR-2026-132. The designations take effect January 1, 2027 and hold for ten years.
It is the first new round since 2018, and 2,594 of the tracts are rural, where the break is larger.
What did Treasury and the IRS announce?
The round ran most of this year. On April 6 Treasury and the IRS released 25,332 eligible tracts for nomination, 8,334 of them rural. On July 1 they began taking nominations from governors and the mayor of the District of Columbia, and 130 more eligible tracts, 28 of them rural, came in during the window. All 6,576 nominated tracts “have been designated as QOZs effective January 1, 2027.”
The law behind it, enacted July 4, 2025 as Public Law 119-21 and called President Trump’s Working Families Tax Cuts in the release, “permanently renewed” the break, added enhanced incentives for rural communities, and set up a process for redesignating zones every ten years. Treasury Secretary Scott Bessent said it gave investors and local leaders “the long-term certainty they need to commit capital to communities that have been overlooked for too long.” The release puts private investment since the zones began in 2017 at more than $110 billion, and points to the CDFI Fund’s Opportunity Zones page for the full list and map.
A tract certified during 2026 runs as a zone from January 1, 2027 through December 31, 2036, under the transitional guidance in Notice 2026-40.
How does the tax break work?
It is not a deduction against rental income. It defers tax on a capital gain you already have.
The IRS sets out the mechanics: you have 180 days from realizing an eligible gain to invest a matching amount in a Qualified Opportunity Fund, for an equity interest and not a debt interest. Eligible gains include capital gains and qualified section 1231 gains, and electing the deferral sets your basis in the fund investment at zero.
How long you hold decides the rest. For money invested after December 31, 2026, Notice 2026-40 says the deferred gain returns to income in the tax year containing the earliest of three dates: a sale or exchange, another inclusion event, or five years from the day you invested. Hold at least five years and your basis rises by 10% of the deferred gain, or by 30% in a qualified rural opportunity fund.
Hold at least ten years and the larger benefit applies: you may elect to raise your basis in the fund investment to its fair market value on the day you sell, which excludes the gain the investment itself earned.
What does the five-year basis increase save?
That is the piece you can put a number on today. Take a $200,000 long-term capital gain at an example 20% federal rate, the example’s own assumption, with no state tax and no net investment income tax:
| Gain brought into income | Tax on it | Year it is reported | |
|---|---|---|---|
| Sell and pay now | $200,000 | $40,000 | 2027 |
| Fund, held five years | $180,000 | $36,000 | 2032 |
| Rural fund, held five years | $140,000 | $28,000 | 2032 |
These are example figures, not a quote.
The deferral itself matters: $40,000 stays invested for five years instead of leaving with next spring’s return. The ten-year exclusion is usually the bigger number, and it applies to what the fund investment grows into, not to the gain you rolled in.
What has to happen to the property?
A fund cannot buy a house in a zone and sit on it. Tangible property counts only if its original use in the zone begins with the fund, or the fund substantially improves it. The IRS defines substantial improvement as additions to basis, during any 30-month period after the property is acquired, exceeding the adjusted basis at the start of that period. On a building, that means spending more on the rehab than the building’s basis.
Rural zones clear a lower bar. Notice 2025-50 says the 2025 law cut that threshold “from 100 percent to 50 percent” for property in a zone made up entirely of a rural area, effective July 4, 2025, and it counts 3,309 of the 2018 zones as entirely rural.
A fund must also keep at least 90% of its assets in qualified zone property, and a zone business must earn at least 50% of its gross income from actively running a trade or business in the zone.
What does it change if you invest in real estate?
It changes your arithmetic only if you have a capital gain to place and will hold it through a fund. The property work is a familiar shape: buy under value, spend about as much again on the rehab, then hold, which is forced appreciation with a 30-month deadline attached. Compare it against the 1031 exchange rules, which defer gain without a fund, and against what depreciation recapture costs on a sale. Ask a tax professional before acting on any of it.
What doesn’t change?
Buying a rental inside a zone with your own cash gets you none of this. The break runs through a fund, on an eligible gain, for an equity interest.
Nothing here touches mortgage rates, what a lender will lend, or the ordinary deductions a rental already gets. Depreciation on a rental you own today works as it did yesterday.
What happens next?
- January 1, 2027: the 6,576 designations take effect and run through December 31, 2036.
- After December 31, 2026: property a fund buys generally cannot count as zone business property unless it is for use in a zone designated after July 4, 2025, or it fits a transition exception in Notice 2026-40.
- December 31, 2028: the designation period for the 2018 zones ends.
- Treasury and the IRS say in Notice 2026-40 that they intend to issue proposed regulations under sections 1400Z-1 and 1400Z-2.
If you expect to realize a gain soon, check the dates first. Property a fund buys after December 31, 2026 generally has to sit in a zone designated today, so take the tract number to the list the IRS release points to before you write an offer.