The End is Near… for Opportunity Zone Capital Gains Deferral

In 2017, Congress created a vehicle for investors to defer the recognition of long-term or short-term capital gains (and the subsequent taxation of those gains) by investing in qualified “Opportunity Zones.” According to the Treasury Department, approximately $112 billion of equity has gone into these zones through the end of 2024. But the deferral of taxation will end with this calendar year. That means it’s time to pay the tax man, right?

Maybe not!

Assuming they pass on investing in “Opportunity Zones 2.0” (a similar vehicle created in 2025 with different timelines), investors who took advantage of this tax planning tool will face bigger tax bills in 2027. Luckily, they have a long-standing, reliable mechanism for reducing that liability: charitable deductions.

Investors and their advisors can consider utilizing cash or appreciated assets to make charitable contributions to qualified 501(c)(3) organizations. Subject to AGI limitations, contributions made in 2026 can reduce taxable income and thereby mitigate the impact of realizing previously deferred short-term or long-term capital gains taxes from maturing Opportunity Zone investments.

In cases where substantial deductions are needed, donors may want to consider “bunching” future years’ contributions into a donor-advised fund (DAF) by Dec 31, 2026. That strategy would create a larger deduction to offset capital gains taxes, and a vehicle for making annual gifts to selected nonprofits for years to come.

For a more detailed analysis of the end of Opportunity Zones 1.0 and the consequences for investors, this article takes a deeper dive. We are grateful to Branson Lee and Sarah Ma at Alston & Bird LLP for this timely and trenchant analysis.

As always, if you are a donor or a professional advisor who has a client with Opportunity Zone related realized capital gains, call the team at the Community Foundation to talk about how charitable donations might help offset some of those taxes and invest in the organizations that are moving Atlanta forward.