Yes. A project can use the New Markets Tax Credit (NMTC) and Opportunity Zone equity at the same time if it meets both programs' rules. As of October 2026, both are permanent: the 2025 law made the NMTC's $5 billion annual allocation permanent and rewrote the Opportunity Zone rules, including a new eligibility test that no longer borrows the NMTC definition.
The NMTC gives investors a federal credit worth 39 percent of an equity investment in a Community Development Entity (CDE), claimed over seven years. The Opportunity Zone program lets investors defer and partly exclude capital gains by investing them in an Opportunity Fund that holds 90 percent of its assets in property or businesses in a Qualified Opportunity Zone. On this page, OZ 1.0 means Opportunity Fund investments made on or before December 31, 2026, and OZ 2.0 means investments made after that date under Public Law 119-21.
- NMTC credit
- 39% over 7 years
- Annual allocation
- $5 billion, permanent
- Recapture period
- 7 years
How the NMTC works
The rules below are from 26 U.S.C. 45D.
- The CDE. A qualified community development entity is a domestic corporation or partnership whose primary mission is serving or investing in low-income communities, that maintains accountability to residents of those communities, and that is certified by Treasury. The CDFI Fund handles certification.
- Allocation. Treasury allocates the national limitation among CDEs it selects, giving priority to those with a record of helping disadvantaged businesses or communities. A CDE must issue its qualified equity investments within 5 years of receiving an allocation.
- The investment. A qualified equity investment is bought at original issue solely for cash, and substantially all of the cash must be used for qualified low-income community investments. A safe harbor treats this as met if at least 85 percent of the CDE's aggregate gross assets are so invested.
- Uses. Qualified low-income community investments include investments in or loans to qualified active low-income community businesses, purchases of qualifying loans from other CDEs, certain counseling services, and investments in or loans to other CDEs.
- Recapture. During the 7 years starting on the investment's original issue date, credits are recaptured if the entity stops being a qualified CDE, the proceeds stop being used as required, or the investment is redeemed.
| Credit allowance date | Credit rate | Cumulative |
|---|---|---|
| Year 1 (date of investment) | 5% | 5% |
| Year 2 | 5% | 10% |
| Year 3 | 5% | 15% |
| Year 4 | 6% | 21% |
| Year 5 | 6% | 27% |
| Year 6 | 6% | 33% |
| Year 7 | 6% | 39% |
The credit allowance dates are the date the investment is made and each of the next 6 anniversaries, so the credit runs seven years, not five. Earlier versions of this page said "5-year" in two places; that was wrong.
According to the CDFI Fund, from the first round in 2002 through the end of 2025 the program awarded $91 billion in allocations to certified CDEs. The CDFI Fund reports that NMTC investments created or retained more than 950,000 jobs and supported 106.2 million square feet of manufacturing space and nearly 15,000 affordable housing units in that period.
Do NMTC areas and Opportunity Zones still overlap?
Under the 2017 law, a tract could be an Opportunity Zone only if it met the NMTC low-income community definition in IRC 45D(e) (or was a qualifying contiguous tract). Section 45D(e) uses a poverty rate of at least 20 percent, or median family income at most 80 percent of the statewide median (non-metro) or of the greater of the statewide or metropolitan median (metro). Every 2018 zone that was not a contiguous tract therefore met the NMTC test when designated.
The 2025 law replaced that link with its own test for 2027 zones: median family income at most 70 percent of the metro (or, outside metro areas, statewide) median, or poverty of at least 20 percent with median family income at most 125 percent of that median, with no "greater of" comparison. The contiguous-tract rule is gone. On identical data, a tract passing the new test would also pass 45D(e), since 70 percent is below 80 percent and both use a 20 percent poverty floor. But the definitions are now separate and may be applied to different data years, so each tract should be checked against both. The reverse has never held: Rev. Proc. 2026-14 lists 25,332 tracts eligible for 2027, and only up to about a quarter of those can be designated.
How the two programs combine
The programs reward different investors and sit at different levels of a deal. NMTC equity goes into a CDE, which then lends to or invests in a business in a low-income community. Opportunity Zone equity goes into a QOF, which owns zone property directly or holds stock or a partnership interest in a qualified opportunity zone business (QOZB).
The natural meeting point is the operating business or project entity. One business might be both a qualified active low-income community business receiving a CDE loan and a QOZB owned by a QOF, if it meets both sets of tests. The QOZB tests include at least 70 percent of tangible property in the zone, at least 50 percent of gross income from active business in the zone, less than 5 percent nonqualified financial property, and none of the listed excluded businesses. Whether one entity satisfies both programs at once is a question for tax counsel.
| Event | NMTC | Opportunity Zone (invested after Dec 31, 2026) |
|---|---|---|
| Year 0 | First 5% credit | Gain deferred; basis starts at zero |
| Year 5 | Credits continue (6% a year) | Deferred gain taxed, less a 10% step-up (30% in a rural fund) |
| Year 7 | Last credit; recapture period ends | No event |
| Year 10+ | None | Appreciation excludable on a sale before the 30th anniversary |
NMTC recapture exposure ends after 7 years. An Opportunity Zone investor who wants the 10-year exclusion needs to stay in longer, so the two exit timelines have to be planned together. The older OZ 1.0 benefits (deferral to December 31, 2026 and the 10 and 15 percent step-ups) are closed to new money and should not drive a new structure.
NMTCs, LIHTCs and mixed-use projects
Like NMTCs, the Low Income Housing Tax Credit (LIHTC) is a dollar-for-dollar federal credit, but it is for affordable rental housing and is claimed over 10 years. A mixed-use property can be divided into separate ownership pieces, for example a condominium structure, so the commercial part uses NMTC financing and the residential part uses LIHTCs. In theory both could be held by an Opportunity Fund if the property is in a zone, but the structure adds legal and tax complexity.
The Historic Tax Credit can join the same stack for a certified historic structure. For more background, see this page and this page, and for the overall structure, the Opportunity Zone capital stack.
Common questions
Can NMTC and Opportunity Zones be used together?
Yes. Nothing in IRC 45D or IRC 1400Z-2 prevents a project from using both. A business in an Opportunity Zone can receive NMTC-supported financing from a community development entity while Opportunity Zone equity comes in through a Qualified Opportunity Fund, if each program's rules are met separately.
Is the NMTC 39 percent over five or seven years?
Seven. Under IRC 45D(a)(2), the credit is 5 percent of the qualified equity investment on each of the first three credit allowance dates and 6 percent on each of the remaining four, for 39 percent in total. The CDFI Fund also describes it as 39 percent claimed over seven years.
Did the 2025 law make the New Markets Tax Credit permanent?
Yes. Public Law 119-21 sec. 70423 amended IRC 45D(f)(1) to set the national limitation at $5 billion for each calendar year after 2019, with no end date, effective for calendar years beginning after December 31, 2025.
Are all Opportunity Zones NMTC-eligible tracts?
The 2018 zones were drawn from tracts that met the NMTC low-income community definition in IRC 45D(e). The 2027 zones use a new, stricter test, so they will generally also meet the NMTC definition, but each tract should be checked. The reverse is not true: most NMTC-eligible tracts are not Opportunity Zones.
When can NMTCs be recaptured?
During the 7-year period starting on the original issue date of the qualified equity investment, if the entity stops being a qualified community development entity, the proceeds stop being used as required, or the investment is redeemed.