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Maryland Department of Housing and Community Development

Maryland Opportunity Zones

The Opportunity Zone program is the nation’s largest place-based economic development initiative. It seeks to encourage long-term private investment in economically distressed communities by offering tax incentives to investors who reinvest capital gains into designated Qualified Opportunity Funds (QOFs). The program was first established by the US Congress through the Tax Cuts and Jobs Act of 2017 and was altered and made permanent by HR1 of 2025. The updates changed eligibility for census tracts and altered tax benefits, requiring each Governor to designate a new list of census tracts to the US Treasury by September 29, 2026.

Opportunity Zone 1.0 remains in effect until 12/31/2026 and this Maryland Opportunity Zones Map can be used to identify zones.

Opportunity Zone 2.0 maps are currently being developed and will become in effect on 1/1/2027.

Under Opportunity Zones 2.0, there are two types of zones: (1) Opportunity Zones; and (2) Rural Opportunity Zone. 

  1. Standard Opportunity Zones are census tracts with either (1) poverty rate of at least 20% AND less than 125% of state/metro Median Family Income (MFI); or (2) A median family income of equal to or less than 70% of the state or area median family income, whichever was greater.
  2. Rural Opportunity Zones are simply Opportunity Zones located in towns or cities of not more than 50,000 people and not urbanized areas contiguous to cities or towns of more than 50,000 people. 

Opportunity Zones 2.0 Designations

Governor Wes Moore may designate up to 25% of the State’s eligible census tracts by September 29th. This equates to 113 census tracts that will be designated as Opportunity Zones between 2027 and 2037 when the next designation round will go into effect. 

This map provides eligible census tracts by county in Maryland. The US Treasury has utilized the 2020-2024 ACS 5- Year and 2020 DECIA datasets to determine eligible tracts in Maryland. To be eligible for designation, a census tract must meet the following criteria: 

  1.  A median family income that does not exceed 70 percent of the metropolitan area median family income; or 
  2. A poverty rate of at least 20 percent and a median family income that does not exceed 125 percent of the metropolitan area median family income. ​

Governor Moore designated DHCD as the lead agency to designate the Opportunity Zone 2.0 census tracts. For any questions on the process, please contact Assistant Secretary Brad Fallon at [email protected]. 

Program Benefits

The following tax benefits will be provided for investments in QOFs beginning January 1, 2027:

  1.  Permanent Program with Rolling Gain Deferral: The Opportunity Zone (OZ) program is now permanent, eliminating the previous 2026 sunset. For investments made on or after January 1, 2027, capital gains reinvested in a QOF are deferred for up to 5 years—ending either upon sale of the QOF interest or five years after the investment, whichever comes first.
  2. Basis Step-Up after 5 Years:
    1. Standard QOF: If held for at least 5 years, the investor receives a 10% step-up in basis on the deferred gain.
    2. The previous additional 5% step-up at 7 years has been eliminated for post-2026 investments
  3. Enhanced Benefits for Rural Investments (QROFs): Created Qualified Rural Opportunity Funds (QROFs) which must invest at least 90% of its assets in rural opportunity zones, those located in towns or cities of not more than 50,000 people and not urbanized areas contiguous to cities or towns of more than 50,000 people. 
    1. Step-up in Basis: Investors in QROFs are provided with a 30% basis step-up if held for at least 5 years, three times the standard QOF benefit. Additionally, QROFs benefit from a relaxed “substantial improvement” rule meaning that improvements need only be 50% of the property’s adjusted basis, instead of the usual 100%. So a $1 million property would only need to add $500,000 in value, rather than double in value.
  4. Tax Exclusion of Post-10-Year Gains: If a QOF or QROF investment is held for at least 10 years, the investor can elect to adjust the basis to fair market value (FMV) at the time of sale. This further allows assets to be held for up to 30 years and still be assessed at FMV so that capital gain taxes do not apply.  

This table provides a comparison of benefits for standard QOFs versus the new QROFs:

Standard QOFs versus the new QROFs
OZ 2.0 FeatureStandard QOFQROF
Gain DeferralRolling 5-year (or until sale)Same
Basis Step-Up after 5 yrs10% of deferred gain30% of deferred gain
10-Year Gain ExclusionBasis → FMV at sale (or year 30)Same
Improvement Threshold100% of adjusted basis50% of adjusted basis (rural only)

The purpose of the program is to attract capital into projects that would not otherwise provide a sufficient return on investment. While the first round of the Opportunity Zone program suffered from insufficient reporting, it is generally accepted that the tax benefits offer the following boosts on return:

  1. Equity Multiple (Total cash returned ÷ Equity invested): An investment that receives all three of the OZ tax benefits can expect a 15% - 25% higher return - an increase of 0.4x - 0.7x - compared to a non-OZ investment over 10 years. For context, an investor may look for a 1.5x - 3.0x return depending on the risks involved.
  2. Internal Rate of Return: Over 10 years, an investor may see an internal rate of return boost of 1.5 to 5 percentage points, with a 3 percentage point increase as the general rule. For context, an investor in an opportunistic investment may look for an 13% - 25% IRR over 10 years. 

The impact of the program is in maximizing returns on investments to investors and, as a result, incentivizing them to invest in projects that would not otherwise provide sufficient returns. Opportunity Zone investments will not make a bad investment good, but can make a decent investment very good. Given that capital is portable and a myriad of factors affect the risk profile of any given investment, this program seeks to benefit communities that have seen a low rate of investment historically when compared to affluent census tracts. 

Additional Resources

Official Guidance 

Demographic Resources

Maryland Programs to Enhance Opportunity Zone Investments​​

Additional Resources​