Heard about Opportunity Zones in Louisville and wondered if they are right for you? If you are selling a property with a gain, considering a rehab, or just curious about investment in neighborhoods like Russell or Smoketown, a clear overview helps. In this guide, you will learn what Opportunity Zones are, how they work for real estate, how to check if an address is in a zone, and which dates really matter. Let’s dive in.
Opportunity Zones explained
Opportunity Zones are a federal tax incentive that encourages long-term investment in designated low-income census tracts. To access the benefits, you invest eligible capital gains through a Qualified Opportunity Fund, called a QOF. The headline benefits are simple: you can defer capital gains, potentially reduce the amount recognized based on hold period, and exclude appreciation on the QOF investment if held long term. You can read the IRS summary in the Opportunity Zones FAQs for details on eligibility and timing on the IRS website.
How OZ investing works in real estate
Invest through a QOF
You must invest through a QOF, which is a partnership or corporation that elects Opportunity Zone status and keeps at least 90% of assets in qualifying OZ property. This 90% test and related reporting are monitored by the IRS, so documentation and compliance matter. Learn more in the IRS Opportunity Zones FAQs.
Qualifying property and improvements
Real estate in a zone can qualify in two main ways. Either its original use in the zone begins with the QOF or the property is substantially improved within 30 months, which generally means investing more than the purchase price into improvements. Simply buying and holding an existing building typically will not qualify without meeting these tests. See the IRS and Treasury guidance for the improvement rules in the 2019 Internal Revenue Bulletin.
Active business test
A QOZ business must be an active trade or business in the zone. Owning and operating real property can qualify, but a purely passive triple-net lease may not. The regulations include income sourcing and intangible property use tests that sponsors must plan for and document. You can review these definitions in the 2019 Internal Revenue Bulletin.
Louisville’s OZ map in plain view
Jefferson County contains multiple designated Opportunity Zone census tracts. Regional planning sources count 19 OZ tracts in Louisville Metro. Always confirm by tract, not just neighborhood name. You can see the regional summary through KIPDA’s OZ page here.
Neighborhoods often associated with OZ tracts in local materials include parts of West Louisville such as Russell, Shawnee, Portland, Park Hill, Parkland, along with Smoketown, Shelby Park, and Phoenix Hill. Treat those as general markers. A parcel is in an OZ only if it sits inside a designated census tract, which you can verify by address.
Check an address in minutes
Use these steps to confirm whether a specific Louisville address is in an OZ:
- Open the HUD Opportunity Zones Map. Click the search bar and enter the street address, city, and ZIP. The map will zoom to the parcel and display the tract status. Start with the HUD OZ map.
- Cross-check with Kentucky’s interactive map. Zoom to Jefferson County and use the layers or search to confirm tract boundaries and nearby OZ sites. Open the Kentucky OZ map.
- Save or screenshot the tract number. Keep it for your files, your tax advisor, and any QOF sponsor you speak with.
Local examples and community context
OZs are often part of larger community strategies in Louisville. For example, affordable housing and community land trust work in Smoketown has been highlighted in local coverage, showing how investment and community priorities can align in OZ neighborhoods. Read more about a Smoketown affordable housing project in this Louisville Public Media report. In Russell, neighborhood planning has referenced OZs as one tool to attract investment and support redevelopment; see the overview on Vision Russell’s Opportunity Zone page.
Dates and deadlines that matter
Congress updated the program in 2025. Under the current framework, the original 2018 designations remain in place through December 31, 2026, and a new 10-year round of designations starts in 2027. Some tracts may change, so you should verify the tract and the rules that apply to your transaction date. Review recent federal updates on the IRS OZ provisions page and the IRS OZ FAQs.
Timing for a seller with a capital gain can be complex. Typically, you would have 180 days to reinvest eligible gains into a QOF. Hold periods of 5, 7, and 10 years affect basis and potential exclusion of appreciation on the QOF investment, but availability depends on when you invest and any transition rules that apply. The December 31, 2026 recognition date for earlier deferrals and the 2027 redesignation schedule are key planning points. The IRS has also issued guidance on rural-area adjustments under the 2025 law, summarized in this IRS rural guidance.
Simple OZ timing overview
| Step or milestone | What it means | Typical timing |
|---|---|---|
| Taxable sale that creates a capital gain | Starts your OZ clock | Day 0 |
| Reinvest eligible gain into a QOF | Required to access OZ benefits | Within 180 days of the gain event |
| 5-year hold threshold | Partial basis step-up on deferred gain may apply | Year 5 from QOF investment date |
| 7-year hold threshold | Additional step-up may apply | Year 7 from QOF investment date |
| 10-year hold threshold | Potential exclusion of QOF investment appreciation | Year 10 from QOF investment date |
| December 31, 2026 | Recognition date for earlier deferrals under prior law | End of 2026 |
| January 1, 2027 | New OZ designations begin for a fresh 10-year period | Start of 2027 |
Note: Which benefits apply to you depends on when you invest and the transition rules in effect. Always confirm dates with a tax professional.
Seller and buyer checklist
- Confirm tract status. Search the address on the HUD OZ map and cross-check on the Kentucky OZ map.
- Map your deadlines. Know your 180-day window and how your hold period lines up with 2026 and 2027 program dates using the IRS FAQs.
- Verify the fund. Ask for QOF certification, 90% asset test plans, improvement budgets, and reporting practices. Review substantial improvement and active business rules in the 2019 IRS bulletin.
- Document rehab plans. For existing buildings, confirm you can meet the 30-month substantial improvement requirement.
- Engage the community. OZ projects in Louisville neighborhoods often include expectations around jobs, housing, and local benefits. Early outreach can strengthen outcomes.
- Assemble your team. Consult a CPA and counsel experienced with Opportunity Zones before you commit funds.
Important advisory
This is tax-sensitive material. Consult a CPA or tax attorney experienced with Opportunity Zones before making investment or tax decisions. You can find program mechanics, deadlines, and definitions in the IRS Opportunity Zones FAQs and related bulletins.
Ready to explore your Louisville OZ options?
If you are weighing a sale with potential gains or you want to evaluate an OZ project in Jefferson County, you do not have to figure it out alone. Our team can help you verify tract status, coordinate due diligence, and connect with experienced local partners. Reach out to Olive + Oak Realty to start a clear, step-by-step plan.
FAQs
What is an Opportunity Zone, in simple terms?
- It is a federally designated census tract where investors can receive tax incentives if they invest eligible capital gains through a Qualified Opportunity Fund and meet program rules, as outlined in the IRS FAQs.
How do I check if a Louisville address is in an OZ?
- Enter the address in the HUD Opportunity Zones Map, then cross-check on the Kentucky OZ map. Only the census tract boundary determines OZ status.
Can I defer tax from my home sale by using a QOF?
- You may defer eligible gains if you invest into a QOF within 180 days and follow all rules. Hold periods affect basis and potential exclusion of QOF appreciation. See the IRS FAQs and consult a tax professional.
What changed for OZs in 2026 and 2027?
- Current 2018 designations run through December 31, 2026. A new 10-year round of designations starts in 2027 under updated criteria, which can affect where future OZ investments apply. See the IRS summary of updates here.
Do OZ rules require major renovations on existing buildings?
- Often yes. For existing property, the QOF usually must complete substantial improvement within 30 months, generally exceeding the purchase price in new capital improvements. The tests appear in the 2019 IRS bulletin.
