Does the 2026 inclusion date change the calculus on a QOF with a 2023 close date

@yolanda_pressley isn't the original poster here but that line about "loaned the IRS money interest free for three years" is exactly where my head went when I finally read the fee disclosure on a bridge fund I put $50k into in 2021. I didn't lose the money but I paid 2.1% in annual management fees on a fund that returned 1.4x over four years, and the deferral math that looked clean in the pitch deck looked a lot uglier when I subtracted what I actually gave up in liquidity on capital I could have put to work in something I could touch. I never got to QOF territory but the structure rhymes. What I'd actually want to know before stress testing the flat scenario: what are the fund's annual fees doing to the effective return if appreciation is minimal through 2026, because a 1.8x gross projection over ten years can get shaved to something much less interesting once you model 1.5-2% drag compounding across the hold period. Have you run the net number on 1.8x with fees, or is that already the net figure in their materials?

Your math is correct, and it is worth saying that plainly because this thread is doing the kind of analysis that actually matters here.

For anyone reading who is newer to this: a Qualified Opportunity Fund (QOF) is a pooled investment vehicle that deploys money into designated low-income census tracts called Opportunity Zones. The original incentive had three pieces. First, you defer paying tax on the gain you invested until an inclusion event (the moment tax becomes due). Second, if you held long enough, a portion of that original gain was reduced, called a step-up. Third, if you held the fund for ten years, any new appreciation inside the fund was potentially tax-free.

The step-up provisions that applied to 2023 entries are effectively gone for most purposes now. The One Big Beautiful Bill Act, signed July 4, 2025, made the program permanent and shifted to a rolling five-year deferral for post-2026 investments, but it did not restore the 15 percent step-up for earlier vintages. So a 2023 investor pays the full original deferred gain at the 2026 inclusion, with no reduction, and the remaining value in the position is entirely the ten-year appreciation exclusion.

That means your 1.8x projection needs to carry the whole position. Whether it does depends on what the underlying assets actually do, and a flat-to-2026 scenario is a legitimate stress test to run. I would not assume any return in either direction, and I am not in a position to model it for you specifically. What I can say is that this is exactly the kind of question to work through with a CPA who has OZ experience before any inclusion event arrives.

What is your current sense of how the underlying assets are performing relative to that 1.8x projection?