Planning & capital strategy
Opportunity Zone fund planning
Opportunity Zones let investors defer and reduce tax on capital gains by investing them in projects in designated communities. The program was made permanent in 2025, and its rules change for investments made after 2026.
How it works
An investor with a capital gain can roll it into a Qualified Opportunity Fund (QOF) within 180 days. The fund invests in property or a business in a designated Opportunity Zone. The investor's tax on the original gain is deferred, part of it can be forgiven after a holding period, and gains on the Opportunity Zone investment itself can be free of federal tax after ten years.
What changed
Legislation in 2025 made the program permanent, with zones redesignated every ten years and new rules for investments made from January 1, 2027: a rolling five-year deferral, a 10% basis step-up after five years (30% for qualifying rural funds), and expanded reporting with penalties. Gains deferred under the original rules generally come due at the end of 2026. The IRS has issued transitional guidance and further regulations are expected. Because the details decide eligibility and timing, every plan is confirmed with a CPA and tax counsel.
Who it can suit
- Hotel, multifamily, mixed-use and industrial projects located in a designated zone, where the project involves new construction or substantial improvement
- Investors with recent or expected capital gains who want to pair tax deferral with a real estate investment
- Sponsors forming a fund for a specific project or a small group of projects
How Star Advantage helps
- Check whether a site is in a current zone and whether the project plan meets the substantial-improvement and operating tests, with your tax adviser
- Model the project with and without the OZ structure, including the effect on equity raise and financing
- Coordinate the fund structure with senior debt, so lender requirements and fund rules do not conflict
- Introduce CPAs, fund counsel and administrators experienced with Opportunity Zone funds
Star Advantage Funding does not sponsor or sell fund interests and does not provide tax or legal advice. Opportunity Zone benefits depend on each investor's facts, the fund's compliance and current law. Star Advantage Funding is not a lender and does not guarantee financing, terms, approvals, savings, concessions or incentives. Results depend on the transaction, the counterparties, market conditions and the services agreed upon.