For business owners planning a sale, one of the most common concerns is the potential income tax liability associated with the transaction. With any business sale, a significant portion of the proceeds may be subject to capital gains taxes. As a result, business owners often seek strategies designed to help mitigate taxes and preserve wealth.
Qualified Opportunity Zones
One strategy that may be worth considering is the use of Qualified Opportunity Zones (QOZs). Originally established under the Tax Cuts and Jobs Act of 2017, QOZs were designed to incentivize investment in designated underserved communities. Qualified investments into these zones provided several key benefits to investors, many of which are no longer available or scheduled to sunset at the end of 2026. However, with the passage of the One Big Beautiful Bill Act in 2025, the QOZ program was extended and modified, creating a renewed planning opportunity for individuals considering this tax-saving strategy.
Fifth Third Private Bank outlines how qualified opportunity zones can be used as a tax-planning tool for business owners facing large capital gains. Taxpayers are permitted to reinvest eligible gains into a Qualified Opportunity Fund (QOF), which then deploys this capital into investments within the approved zones. Under the new rules introduced in 2025, taxpayers who reinvest gains into QOFs after Dec. 31, 2026, may be eligible for the following tax benefits:
For business owners, the 180-day clock often begins upon the sale of equity in the business or the sale of business assets. However, there are special rules that apply to business owners of pass-through entities. When gains are reported via Schedule K-1 from a partnership or S corporation, such as following the sale of a business asset, a business owner may choose to begin their 180-day reinvestment window on one of the following dates:
This flexibility can provide valuable planning opportunities for pass-through entity owners, offering them greater optionality and potentially more time to identify and evaluate a QOF investment. For business owners planning a sale, the 180-day window provides an opportunity to align the timing of a potential transaction with a reinvestment into a QOF to qualify for associated tax benefits.
As a result, QOZ investments are better utilized as one component of an investor’s overall strategy, rather than the entirety of an investment plan. Rather than allocating the entirety of a gain into a QOF, it is often advisable to dedicate a portion of the proceeds to QOFs while maintaining a diversified portfolio across other asset classes.
The sale of a business is a significant milestone that is often the result of years, if not decades, of dedication and hard work. While the associated tax impact can be meaningful, strategies such as Qualified Opportunity Zones may offer a way to reduce that burden while providing an opportunity to reinvest capital for future growth.
With the updates introduced in 2025, QOZs have regained relevance as a planning tool for business owners evaluating an exit. However, their effectiveness depends on early planning, proper timing, and alignment with one’s financial goals. Utilizing QOZs as a tax mitigation strategy is most effective when thoughtfully integrated into the broader transaction and wealth planning process. Coordination with experienced tax, legal, and financial advisors is essential to determine whether this strategy is appropriate and to execute it effectively.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
