Low-Income Housing and Opportunity Zones

Jul. 4, 2025: New credit provisions enacted in budget

Increases the 9% credit to 12% permanently, pushing LIHTC related investment beyond $15 billion in the next ten years
Permanent 25% Bond threshold reduction for the Private Activity Bond (PAB), used in conjunction with the 4% credit. Conditional on 5% or more of costs being financed with PABs issued after December 31, 2025
OBBBA reinstates 100% bonus depreciation permanently for qualified property, which will make investments with the 4% LIHTC credit more attractive and stretch each dollar further by allowing developers to remove 100% of the cost of properties from their taxable income if they meet qualifying conditions

Jan. 20, 2025 (retroactive start date)

The 100% bonus depreciation rate applies for all properties acquired and placed in service after January 19th, 2025.

Jan. 1, 2026: LIHTC provisions take effect

12% credit takes effect.
For projects placed in service after December 31, 2025, the PAB test threshold will be 25% instead of 50%.

Jul. 4, 2025: OBBBA makes Opportunity Zones a permanent part of the tax code

Narrows the definition of low-income community by reducing it from 80% of the median area income to 70%, and making contiguous tracts ineligible for OZ designation.
Census tracts with a median family income of over 125% the median area income are totally ineligible for OZ designation.
Applies the 25% designation limit to Puerto Rico as well (ie only 25% of eligible LCIs can receive designation, at the governor’s discretion).
Basis step up and deferral: capital gains invested in OZ funds can defer tax payments on a rolling basis for up to five years.
In non-rural OZs, there will be a 10% step up for investments that are held in OZ funds for over 5 years.
New rural provisions: provide a 30% step up for investments held in rural OZ funds for over 5 years.
More stringent reporting requirements: more detailed transparency requirements from OZ fund usage, and $15 million reserved for implementation.

Jul. 1, 2026: Governors must submit OZ designation list to be considered for 2027 OZ status.

Jan. 1, 2027: New Opportunity Zone rules kick in.

A later start date gives local governments some time to adjust capital plans and strategy, considering HOME, CDBG, bonds, and more.