On September 25, 2026, Governor Mike Braun submitted 126 census tracts to the U.S. Treasury for the 2027-2036 designation cycle. Once Treasury certifies them, the zones take effect January 1, 2027 and run through December 31, 2036. The list reaches all 15 economic development regions, 47 counties, and portions of 61 cities and towns, and 42 of the tracts are rural.
For property investors, the key point is what Opportunity Zones do not do. They are a federal capital-gains incentive that does not lower Indiana assessed values, change tax rates, or loosen the 1%/2%/3% circuit-breaker caps. Any property tax relief on an OZ project comes from separate local tools: abatements and TIF.
What the 2025 Federal Law Changed
The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) made the program permanent and rewrote 26 U.S.C. 1400Z-1.
- Decennial rounds. Governors get a 90-day nomination window starting July 1, 2026, repeating every 10 years. A designation lasts 10 years from the January 1 after Treasury certifies it.
- Tighter income test. A tract qualifies if its median family income is at or below 70% of the statewide median (or the metro median, inside a metro area), or if it has a poverty rate of at least 20% and a median family income at or below 125% of that benchmark. The old contiguous-tract option was repealed.
- 25% cap. A state may designate no more than 25% of its low-income tracts per round.
The investor side changed in 26 U.S.C. 1400Z-2, effective for amounts invested in qualified opportunity funds after December 31, 2026:
- Rolling five-year deferral. Deferred gain is recognized when the investment is sold or five years after it was made, whichever comes first.
- Basis step-up after five years. Basis rises by 10% of the deferred gain, or 30% for a qualified rural opportunity fund (at least 90% of assets in all-rural zones).
- Ten-year exclusion with a 30-year ceiling. After 10 years, investors can elect a fair-market-value basis. Past 30 years, basis is fixed at the 30-year value.
- Easier rehab test in rural zones. Existing property must be "substantially improved" by more than its adjusted basis within 30 months; in an all-rural zone the threshold is 50%, effective July 4, 2025.
A "rural area" is anywhere outside a city or town of more than 50,000 people and the urbanized area next to it.
Warning
If you hold a 2018-era OZ investment, the current text of 1400Z-2(b)(1) still makes gain deferred under the original program taxable at the earlier of a sale or December 31, 2026. That gain shows up on 2026 returns whether or not you sell.
How Indiana Picked Its Tracts
The IEDC selection page says Indiana had 501 eligible tracts when it submitted, and 126 is the 25% maximum. Treasury later added two eligible tracts (503 total) without changing the 126-tract limit or the submitted list. From June 3 to July 17, 2026, a public portal took recommendations: 88 individuals and organizations submitted 350 recommendations covering 234 unique eligible tracts. The IEDC led selection, aligning picks with state and regional priorities including READI.
Our count of the published nomination list shows where the tracts landed. Marion County has 29, the most of any county. Lake has 12, Allen 9, St. Joseph 7, and Vanderburgh 5. Its 11-digit tract IDs are a useful filter when screening rental markets by county.
The Property Tax Angle: OZ Does Not Touch Your Assessment
Indiana assessors value a parcel under the same rules whether or not it sits in an Opportunity Zone. The zone label does not appear anywhere in how assessments work. The circuit-breaker caps under IC 6-1.1-20.6 are unchanged: 1% for homesteads, 2% for residential rentals and ag land, 3% for commercial and industrial.
In practice the program pushes property taxes up. OZ benefits require new construction or substantial improvement, and that new value goes onto the tax roll at the full rate for your district (see the 2026 Marion certified rates). A rehabbed apartment building in a nominated Indianapolis tract is still a 2%-cap rental, appealable on the income approach like any multifamily property. Model the higher post-improvement bill before closing.
Stacking OZ With Abatements and TIF
Because OZ does nothing for the local bill, investors pair it with Indiana's own incentives:
- Tax abatements (IC 6-1.1-12.1). The designating body (a county, city, or town fiscal body; in Marion County, the Metropolitan Development Commission) can declare an economic revitalization area and grant a deduction on the increase in assessed value from redevelopment or rehabilitation (IC 6-1.1-12.1-4), on a schedule that generally may not exceed 10 years (IC 6-1.1-12.1-17(b)). The statement of benefits must be filed before the work begins (IC 6-1.1-12.1-3), so do not let the 30-month OZ improvement clock rush you into breaking ground first. Our Marion County abatement phase-out analysis shows how the deduction steps down.
- TIF (IC 36-7-14-39). Inside an allocation area, taxes on assessed value above the base go to the redevelopment commission instead of the regular taxing units. Your bill does not change, but increment can fund roads, utilities, or developer reimbursements that make an OZ deal work. See how TIF works and which Indianapolis districts are expiring.
Note
The federal and local incentives are separate decisions. Treasury certifies the zone; the local designating body separately decides on an abatement; the redevelopment commission controls TIF. Winning one does not win the others.
The same 2025 law also changed the federal SALT deduction; model each provision separately.
Investor Checklist for OZ 2.0 in Indiana
- Check whether your target parcel's census tract is on the IEDC nomination list, and wait for Treasury certification before you commit capital.
- Time new investments for after December 31, 2026, when the new rules apply; budget for 2018-program gains recognized in 2026.
- Decide whether a rural-only fund's 30% step-up and 50% improvement test fit your deal.
- File an abatement statement of benefits with the designating body before construction begins.
- Ask the redevelopment commission whether the parcel sits in a TIF allocation area and what increment financing is available.
- Underwrite the post-improvement assessed value at your district's full rate and cap class.
AribaTax investor tools pull assessed values, tax histories, and comparable sales for parcels in nominated tracts; our landlord and investor software guide covers tracking a portfolio's tax side after closing.