Hawaii Opportunity Zone Update: December 31 2026 Expiry Date for Kauai Rural OZ Investment

The 1,000 ac Kukui’ula resort community on the South Shore of Kauai is located in one of the 8,764 IRS-designated Opportunity Zones (OZ 1.0) created by the 2018 Tax Cuts and Jobs Act to encourage economic growth and job creation in specific communities across the country.

Rural Opportunity Zones Created in 2025

In 2025 3,309 of the Opportunity Zones 1.0 were designated Rural Opportunity Zones, and Kukui’ula is located in one of the 12 Rural Opportunity Zones in Hawaii. The July 2025 One Big Beautiful Bill Act created two specific incentives for Rural Opportunity Zone investors:

1. The substantial improvement requirement was reduced from 100% to 50%.
2. Investors receive a 30% step-up after five years, triple what urban OZ investors receive.

There are a limited number of qualified OZ 1.0 Kukui’ula homesites with vacation rental zoning available for investment. Vacation rental income would qualify as required business income for OZ 1.0 properties. Current homesite prices range from $895,000 for a 12,160 sq ft lot to $4,875,000 for a 1.63 ac double lot.

Reduced 50% Improvement for $4+ million Kukui’ula homesites

The exceptional $4 million+ lots of the Kula Makai Neighborhood would qualify for the reduced 50% improvement incentive under the Rural OZ designation, and now worth consideration as a qualified OZ 1.0 investment. The appreciation potential for completed homes in Kula Makai is considered the best.

Zero Tax Incentive for Kukui’ula OZ 1.0 Investors 

In 2025 Kukui’ula homes sold from $3,675,000 to $16,700,000. The incentive for the Kukui’ula OZ 1.0 investor is zero tax owing on the capital gains on the sale of the Kukui’ula qualified OZ 1.0 investment property, if sold after at least 10 years.

Opportunity Zones 1.0 Set to Expire December 31 2026

All the 2018 opportunity zones created under Opportunity Zones 1.0 are set to expire December 31, 2026, and new criteria were set for the ten-year Opportunity Zones 2.0 program which begins January 1, 2027.

Kauai Ineligible for Opportunity Zones 2.0 Program

The new criteria for Opportunity Zones 2.0 eliminated all Kauai census tracts from being considered for OZ 2.0 designation by the Hawaii governor. Therefore, the unique opportunity to invest capital gains from the sale of real estate, stocks, and a business in Kukui’ula, Kauai qualified OZ 1.0 property under the less stringent reporting rules of OZ 1.0 ends in five months.

Five Months Remain to Invest in Kukui’ula OZ 1.0 Property

10 years go by like the blink of an eye, five months like a high-speed train. December 31, 2026 OZ 1.0 expiration date will be here before we know it. Schedule time to discuss your capital gains investment options with your financial advisors and determine if investing capital gains in qualified OZ 1.0 property at Kukui’ula Kauai works for you and your family.