As of October 2026, a gain realized in 2026 can be deferred under the new Opportunity Zone rules if it is invested in a Qualified Opportunity Fund (QOF) on or after January 1, 2027 and inside its 180-day window (Notice 2026-40, sec. 4.02(2)). The same gain invested in 2026 is an OZ 1.0 investment: its deferral ends on December 31, 2026, with no step-up.
On this site, OZ 1.0 means a QOF investment made on or before December 31, 2026, and OZ 2.0 means one made after. This page explains how each path is taxed. It does not say which one to choose; that depends on facts only you and your adviser have.
The two paths for a 2026 gain
| Question | Invested in 2026 (OZ 1.0) | Invested Jan 1, 2027 or later (OZ 2.0) |
|---|---|---|
| When the deferred gain is taxed | Tax year that includes Dec 31, 2026 (sec. 4.01(1)) | Tax year that includes the earliest of a sale, another inclusion event, or 5 years after the investment (sec. 4.02(2)) |
| How long the deferral lasts | Until Dec 31, 2026: days or months | Up to 5 years |
| Step-up on the deferred gain | None (5 years cannot be reached by Dec 31, 2026) | 10% after 5 years; 30% in a qualified rural opportunity fund |
| Can the taxed gain be reinvested? | No (sec. 4.01(2)) | Notice 2026-40 does not address the 5-year inclusion |
| 10-year election on appreciation | Still available (sec. 4.01(3)) | Available |
| Limit on the 10-year election | Dispositions through Dec 31, 2047 | 30-year cap: basis fixed at fair market value on the 30th anniversary |
| Where the fund's new property can be | Fund invests under the existing rules; property bought after 2026 in a 2018 zone generally does not qualify (sec. 5.01(1)) | 2027 zones, designated Jan 1, 2027 to Dec 31, 2036, or 2018 zones under transition exceptions |
The table is about the investor's tax rules only. It says nothing about which funds will exist, what they will buy, or how they will perform. For the full regime comparison, see OZ 1.0 vs OZ 2.0. For what OZ 1.0 investors owe at year end, see the December 31, 2026 inclusion.
Which 2026 gains can reach January 1, 2027
The question is whether the 180-day window is still open on January 1, 2027. The window generally begins on the day the gain would otherwise be recognized (26 CFR 1.1400Z2(a)-1(b)(7)(i)). Counting the day of sale as day 1, as this site's calculators do, the last day to invest is the sale date plus 179 days.
For a direct sale, that puts the first qualifying date at July 6, 2026: a gain realized that day has a window that ends January 1, 2027. A gain realized earlier in 2026 has a window that closes in 2026, so the only Opportunity Zone path for it is an OZ 1.0 investment.
| Type of gain | Window generally starts | Authority |
|---|---|---|
| Direct sale of stock, crypto, real estate or a business | Day the gain is recognized | 26 CFR 1.1400Z2(a)-1(b)(7)(i) |
| Gain passed through from a partnership | Last day of the partnership's tax year; or, by choice, the partnership's sale date or the unextended due date of its return | 1.1400Z2(a)-1(c)(8)(iii) |
| REIT or mutual fund capital gain dividend | Last day of the shareholder's tax year, or the payment date | 1.1400Z2(a)-1(b)(7)(ii) |
| Net section 1256 contract gain | Last day of the tax year | 1.1400Z2(a)-1(b)(11)(vi)(B) |
| Installment sale gain | Each payment date, or the last day of the tax year | 1.1400Z2(a)-1(b)(11)(viii)(B) |
Several of these default to the last day of the tax year, which for a calendar-year taxpayer is December 31, 2026. A window that starts that day runs well into 2027. Notice 2026-40 points to the existing timing rules for what counts as a timely investment, but it gives no worked example for pass-through gains. Before relying on a pass-through or year-end start date to reach OZ 2.0, confirm the reading with an adviser.
A hypothetical, both ways
Hypothetical example
Suppose an investor sells stock on September 15, 2026 and realizes a $1,000,000 long-term gain. The 180-day window runs through March 13, 2027.
Path 1: invest $1,000,000 in a QOF on November 1, 2026. This is OZ 1.0. On December 31, 2026 the investment has been held two months, so there is no step-up. If the interest is worth at least $1,000,000, the full $1,000,000 is included in 2026 income. The investor keeps the fund interest and the possibility of a 10-year election later.
Path 2: invest $1,000,000 in a QOF on February 1, 2027. This is OZ 2.0. Absent an earlier sale or inclusion event, the deferred gain is included in the tax year that includes February 1, 2032. If the investment is held 5 years, basis rises by $100,000 first, so $900,000 is included, assuming the interest is worth at least $1,000,000. In a qualified rural opportunity fund the step-up would be $300,000, leaving $700,000.
Without any QOF investment, the $1,000,000 gain is reported on the 2026 return. The figures show how the rules apply, not what any investor should do.
Whether the extra years of deferral and the step-up outweigh other factors is a modeling question. The OZ 2.0 tax benefit calculator runs the numbers, and Opportunity Zone vs paying tax now sets out the comparison.
What is not settled yet
- The regulations still say 2026. The regulation defining eligible gain still limits it to gain recognized before January 1, 2027. Notice 2026-40 describes the new rules, and Treasury has said proposed regulations will follow. The site treats the notice's position as the current IRS view, pending regulations.
- The 2027 zone list. As of October 30, 2026, Treasury had not published a national list of certified 2027 zones; the IRS has said it expects to before January 1, 2027. See the 2027 designation round.
- Rural fund testing. The 30 percent step-up needs a fund holding at least 90 percent of its assets in rural-zone property. How that is measured across 5 years has no guidance.
- The 30-year rule. Notice 2026-55 asks how the 10-year election should work for investments still held at the 30th anniversary.
Questions to ask your adviser
- When does my 180-day window start? Which start dates can I choose for this type of gain, and does any of them keep the window open on January 1, 2027?
- What are the two outcomes in dollars? Tax on the 2026 return if I invest in 2026, versus tax in the 5-year inclusion year if I invest in 2027, with my own rates.
- Can I defer part of the gain? The regulations allow partial deferral; the remainder stays eligible for a later election within its window.
- Does my state follow the federal rules? See state tax conformity.
- Which zones will the fund invest in? A 2018 zone, a 2027 zone, or both, and what that means under the transition rules.
- Is the fund a qualified rural opportunity fund? If so, how does it plan to stay at 90 percent rural?
- What happens if the investment closes late? A missed window means no deferral at all.
For the underlying timing rules, see the 180-day rule and eligible gains. For the fund-side rules, see Notice 2026-40 transition rules.
Common questions
Can I sell in 2026 and invest in an Opportunity Fund in 2027 under the new rules?
Notice 2026-40 sec. 4.02(2) says eligible gain realized on, before or after December 31, 2026 that is invested in a QOF on or after January 1, 2027, within its 180-day window, can be deferred under the new rules. The 180-day window has to reach January 1, 2027, and the investment has to be made inside it.
What happens if I invest a 2026 gain in an Opportunity Fund in 2026?
It is an OZ 1.0 investment. The deferred gain is included in income for the tax year that includes December 31, 2026, and an investment made in 2026 cannot reach the 5-year step-up by then. The investment can still qualify for the 10-year election on a later sale.
Which 2026 gains have a 180-day window that reaches 2027?
For a direct sale, counting the day of sale as day 1, a gain realized on or after July 6, 2026 has a window that includes January 1, 2027. Gains passed through from partnerships, REIT and fund dividends, section 1256 contracts and installment sales have other start dates, so check each one with the transition checker and an adviser.
Should I wait until 2027 to invest in an Opportunity Zone fund?
This site does not answer that, because it depends on your gain, your other income, the fund and your tax adviser's reading of guidance that is still being written. The page lays out how each choice is treated and the questions to raise before deciding.
Is an investment made on December 31, 2026 OZ 1.0 or OZ 2.0?
OZ 1.0. Notice 2026-40 sec. 4.01 covers investments made on or before December 31, 2026, and the new rules apply to amounts invested after that date. Sec. 4.02 covers investments made on or after January 1, 2027.