Opportunity Zones are designed to attract private investment to communities that have experienced limited investment or economic challenges. The incentive offers federal tax benefits to investors who reinvest eligible capital gains into qualifying businesses and development projects in designated areas.
The goal is to help make projects financially feasible and encourage investment that can support jobs, housing, business growth, and community revitalization. For a business or developer, the program can provide access to investment capital. For an investor, it offers potential tax savings in exchange for a long-term investment.
On November 6, 2026, Michigan announced its final Opportunity Zone 2.0 designations, following federal approval. Washtenaw County has 13 designated census tracts in this new round, effective January 1, 2027, through December 31, 2036.
How do Opportunity Zones work?
Investors who earn eligible capital gains, such as profits from selling stock or other assets, can reinvest those gains in a Qualified Opportunity Fund. The fund then invests in eligible businesses or property within designated Opportunity Zones.
Investors may receive tax benefits for meeting the program’s requirements and holding their investments over time. Businesses and development projects may benefit by attracting capital from these funds.
Opportunity Zones are a federal tax incentive, rather than a grant program. A business does not automatically receive funding or a tax break simply because it is located within a designated area.
Originally established in 2017, the incentive became a permanent part of the federal tax code through legislation enacted in 2025. The updated program, commonly called Opportunity Zones 2.0, introduces new tract designations every 10 years, revised investment incentives, and additional benefits for qualifying rural investments.
Where are Washtenaw County’s Opportunity Zones?
The following Washtenaw County census tracts have been designated for Opportunity Zones 2.0:
4001, 4042, 4056, 4074, 4106, 4107, 4108, 4110, 4120, 4121, 4126, 4140, and 4550.
Explore the MEDC interactive Opportunity Zones map to view tract boundaries and identify potential investment locations.
Note: Designations apply to specific census tracts rather than entire cities or townships. Confirm a property’s location within a designated tract before evaluating a project’s eligibility.
The U.S. Treasury’s Opportunity Zones data page provides the official designation lists.
What projects can Opportunity Zones support?
Qualified Opportunity Funds can invest in eligible operating businesses and real estate projects. Potential uses include:
- Business expansion and investment in qualifying companies.
- Manufacturing facilities and eligible business equipment.
- Multifamily housing and mixed-use development.
- Commercial redevelopment and other qualifying real estate projects.
A location within an Opportunity Zone is only one requirement. The fund, business, property, and investment structure must also meet federal eligibility rules.
Learn more through HUD’s Opportunity Zones investor guide.
What tax benefits are available under Opportunity Zones 2.0?
For qualifying investments made beginning January 1, 2027, the updated program offers three principal federal tax benefits:
- Postponing tax on the original gain: Investors may defer recognition of eligible capital gains reinvested in a Qualified Opportunity Fund for up to five years, unless a sale or another event triggers earlier recognition.
- Reducing the original gain subject to tax: After a five-year holding period, investors generally receive a basis adjustment that reduces the original deferred gain subject to tax by 10%. Qualifying investments in Qualified Rural Opportunity Funds may receive a 30% reduction.
- Excluding qualifying growth in the new investment: Investors who hold a qualifying fund investment for at least 10 years may elect to exclude qualifying appreciation in that investment from federal capital gains tax, subject to applicable rules. This benefit applies to growth in the fund investment, rather than the original gain that was reinvested.
Review HUD’s comparison of Opportunity Zones 1.0 and 2.0 and the IRS Opportunity Zones guidance for additional details.
How do Opportunity Zones 1.0 and 2.0 overlap?
Some Washtenaw County census tracts are designated under both the original Opportunity Zones program and Opportunity Zones 2.0. Others are included in only one round.
The original designations generally remain in effect through December 31, 2028, while the new designations run from January 1, 2027, through December 31, 2036. This creates a two-year overlap in designation periods.
For tracts included in both rounds, the new designation provides continued participation through 2036. However, investment timing and applicable federal rules determine which tax benefits are available. A designation under both rounds does not provide duplicate tax benefits.
For tracts included only in the original round, the existing designation does not automatically extend through 2036. Different rules also apply to existing investments and new property acquisitions during the transition.
For investments made under the original rules, remaining deferred gains generally must be recognized no later than December 31, 2026. Existing investments may still qualify for benefits associated with longer holding periods if they meet the applicable requirements.
Investors and project owners should review the IRS transitional guidance with their tax advisors when evaluating existing investments or projects spanning the transition.
Explore an investment or development opportunity
Ann Arbor SPARK can help businesses, developers, and community partners explore locations and connect with local economic development resources in Washtenaw County.
Contact Ann Arbor SPARK to discuss your project.
Additional resources
- MEDC: Michigan Opportunity Zones and interactive map
- U.S. Treasury: Official designation data
- HUD: Opportunity Zones investor guide
- HUD: Opportunity Zones 1.0 and 2.0 comparison
- IRS: Opportunity Zones regulations, guidance, and resources
This page provides general information and is not tax, legal, or investment advice. Consult qualified advisors to evaluate eligibility, investment timing, and applicable requirements.
