The year 2021 will be a big year for opportunity zone (OZ) investors, real estate developers, and qualified opportunity zone fund (QOZF) managers. There are a number of deadlines investors should be aware of for 2021.
Some investment deadlines have already passed, but there is still a basis step-up deadline that hasn’t passed, providing investors with some time to take advantage of this tax benefit.
In this article, we’ll go through the details of what to expect for OZ deadlines in 2021 and beyond. Note that some of these dates have been extended due to COVID-19. The final dates are shown below.
March 31, 2021 — For individual taxpayers who had gains from October 4, 2019, through October 2, 2020, this is the last date to invest those gains. For a pass-through entity (partnership or S-Corp) Schedule K-1 that had gains at any point in 2019, this deadline also applies.
IRS Notice 2021-10 is an extension of the December 31, 2020 date, pushing it to March 31, 2021.
June 30, 2021 — First of two annual asset tests for Qualified Opportunity Zone Businesses (QOZB) and QOZF. This date is also an extended 31-month working capital period.
September 11, 2021 — This date applies to gains for a pass-through entity (partnership or S-corp) Schedule K-1. It is the deadline for investing gains made during 2020.
December 31, 2021 — Second of two annual asset tests for Qualified Opportunity Zone Businesses and QOZF. This is also the last date that investors can contribute capital into a QOZF and receive a 10 percent step-up in basis. A 10 percent step-up in basis reduces the investor’s original capital gains by 10 percent.
Looking out past 2021 and up to 2026, deadlines are focused on investments for eligible capital gains. You’ll notice this set of deadlines falls at the end of each June.
Starting in 2021, eligible gains can be invested on a rolling annual basis.
June 28, 2022 — Eligible capital gains recognized in 2021 must be invested by this date.
June 28, 2023 — Eligible capital gains recognized in 2022 must be invested by this date.
June 27, 2024 — Eligible capital gains recognized in 2023 must be invested by this date.
June 28, 2025 — Eligible capital gains recognized in 2024 must be invested by this date.
June 28, 2026 — Eligible capital gains recognized in 2025 must be invested by this date.
December 31, 2026 — Deferment on original gain ends, and gain is recognized.
April 15, 2027 — Income taxes for 2026 are due. This includes tax payments due on your original deferred gain.
June 28, 2027 — The last date to invest 2026 capital gains. This is also the final deadline to invest in a QOZF for the 10-year gain exclusion.
2028 — The first year in which some of the earliest Opportunity Zone investments may be sold and qualify for the 10-year gain exclusion.
December 31, 2028 — Expiration of the designation of Qualified Opportunity Zones. QOZFs may still be active after this date to receive the 10-year exclusion. Expiration should not have any effect on receiving this incentive.
June 28, 2037 — The earliest date on which the last Opportunity Zone investments may be sold and qualify for the 10-year gain exclusion. Applies to 2026 through June 28, 2027, deferred gains that were invested into a QOF.
10-year gain exclusion also starts ending on this date for deferred gains invested into QOZF from 2026 through June 28, 2027. If held for 10 years, those investments can now be sold.
December 31, 2047 — The ability to eliminate gains on a taxpayer’s QOF investment could cease upon the expiration of QOZ designations.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.