Who can invest in an Opportunity Zone fund?

Any eligible taxpayer, meaning a person that may recognize gains for federal income tax purposes, can invest an eligible gain in a Qualified Opportunity Fund (QOF) and elect deferral.¹ The IRS confirms that you can use the incentive even if you do not live, work or have a business in an Opportunity Zone.²

The test is about the gain, not the investor. If you have a capital gain that would otherwise be taxed, and you invest that amount in a QOF within 180 days, you qualify. The gains that count are covered in which capital gains qualify for deferral.

Not under the tax law, but usually in practice. Most QOFs raise money in private placements under SEC Regulation D, and those offerings are typically limited to accredited investors as defined in Rule 501 of Regulation D.⁵

Entities can qualify too, including those where all equity owners are accredited.^5,6 Fund minimums are set by each sponsor and vary widely. A family or business owner can also form its own QOF to develop its own project, in which case no outside offering is involved. Securities questions are covered in securities rules for Opportunity Zone funds.

Either can. A partnership, S corporation, estate or non-grantor trust that realizes an eligible gain can elect to defer it by investing at the entity level within its own 180 days. If the entity does not elect, each owner can invest their allocated share.^1,7

The pass-through timing rules are detailed in investing partnership and K-1 gains.

Foreign investors can, retirement accounts gain nothing. The IRS states that nonresident alien individuals and foreign corporations may generally elect to defer eligible gains that are otherwise subject to federal income tax in their hands.² A foreign investor whose gain is not subject to U.S. tax has nothing to defer.

IRAs, 401(k) plans, pension funds and charities are in the same position: gains inside them are not currently taxed, so there is no gain to defer and no reason to accept the constraints of a QOF for tax purposes. Such an account can still invest in a fund for its economics, but it will not get Opportunity Zone benefits.

You can invest any amount up to your eligible gain and get the benefits on that amount; there is no dollar cap. You do not need to use the actual proceeds of the sale. Any cash invested within 180 days, up to the amount of the gain, can support the election.⁷

Money above the gain is allowed but treated differently. Under §1400Z-2(e)(1), an investment only part of which is funded with deferred gain is split into two separate investments: the gain portion gets the tax benefits and the rest is an ordinary investment.⁴

The investment must be equity: a partnership interest or stock, including preferred stock. A loan to a QOF is not a qualifying investment, although an investor can pledge the QOF interest as collateral for a loan.⁷ An interest received for services, such as a sponsor's carried interest, is not a qualifying investment.¹

The mechanics are short and the deadlines are firm. The IRS describes the process on its page for investing in a QOF.³

File the deferral election on Form 8949 with your return for the year of the gain, listing the QOF's name and EIN and the deferred amount, and file Form 8997 every year you hold the investment.^8,9 Novogradac tracks $43.61 billion of equity raised by QOFs that report to it through the first quarter of 2026, a measure of how many investors already use these steps.¹⁰

Death is not an inclusion event. The heir takes the QOF interest with the decedent's holding period, and the deferred gain becomes income in respect of a decedent, taxed when it would have been taxed to the investor.¹¹ A gift of the interest, other than to a grantor trust, is an inclusion event that triggers the deferred gain.¹¹ Estate planning with QOF interests is worth discussing with your tax adviser before you invest. Investor-specific planning is in Opportunity Zones for investors and Opportunity Zones for family offices.