Tax Tip 2026-04: Enhanced tax incentives for Qualified Opportunity Zone investments in rural areas

IRS Tax Tips

Jan. 20, 2026

Issue Number: Tax Tip 2026-04

Enhanced tax incentives for Qualified Opportunity Zone investments in rural areas

Recent changes to Qualified Opportunity Zones enhance tax incentives for taxpayers who invest in rural areas. Investments in QOZs ultimately help improve economic growth and job creation in these communities. Under the One, Big, Beautiful Bill, there are two important changes.

What’s new for Qualified Opportunity Zones

A rural area is now defined as any area other than a city or town with a population greater than 50,000, and any urbanized area contiguous and adjacent to a city or town with a population greater than 50,000. This definition applies to States, the District of Columbia and U.S. territories.
The substantial improvement threshold for improvements to property located in a QOZ that is comprised entirely of a rural area, has been modified. As of July 4, 2025, the substantial improvement threshold for required additions to the basis for property located in these QOZs was reduced from 100 percent to 50 percent.

There are currently 8,764 QOZs in the U.S., many of which have experienced a lack of investment for decades. Notice 2025-50 identified 3,309 of those QOZs as a rural area.

More information
One, Big, Beautiful Bill provisions

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Issue Number: Tax Tip 2026-04