Hawaii Opportunity Zones Update: Time to Buy a Homesite in Kukui’ula Kauai?

The Kukui’ula community on the island of Kauai is located in one of the 8,700 IRS-designated Opportunity Zones, providing tax incentives for investors. The deadline for making Opportunity Zone investments in Kukui’ula vacant land is December 31 2026.

Looking Back: During the peak of the Internet bubble in 1999 AOL Time Warner Chairman Steve Case purchased Grove Farm, which owned 22,000 acres on Kauai, as well as a majority stake in Maui Land & Pineapple, which owned 28,600 acres on Maui. At that time a friend said to me: “Steve Case sold paper and bought dirt.”

Kukui’ula: Opportunity to “Sell Paper and Buy Dirt” Before December 31 2026 OZ Deadline

8,700 opportunity zones (OZ) created by the 2018 Tax Cuts and Jobs Act were designed to encourage economic growth and job creation in specific communities and census tracts across the country. The legislation allows taxpayers to invest capital gains from shares — the paper — in underimproved property — the dirt — in those 8,700 designated opportunity zones. (Capital gains from the sale of real estate and businesses are also permitted under the act.)

Two Opportunity Zones were designated on Kauai in 2018 — the Lawai Hawaii Census Tract 406.04 and Wainiha Hawaii Census Tract 401.04.

Kukui’ula, a 1,000 acre planned community, is situated in the Lawai Hawaii Census Tract 406.04 and offers investors the opportuniy to sell paper and buy dirt until December 31 2026 when the 10-year Lawai Hawaii Census Tract 406.04 Opportunity Zone term expires.

Kukui’ula Available Homesites Priced from $995,000 to $6.2 Million for Opportunity Zone Investors

There are currently 26 unimproved Kukui’ula homesites listed for sale from the $995,000 garden view 10,000 sq ft Kaulu Neighborhood Homesite 25, to the $1,350,000 oceanview 15,437 sq ft Aepo Nei Neighborhood Homesite 13, to the $6,200,000 panoramic coastline view 1.63 ac Kula Makai Neighborhood Homesite 6.

Current Opportunity Zone Rules

Improvement of the initial OZ investment with a further investment of at least 100% of the cost of the initial investment within 30 months, and

Create business income from that improved OZ investment, and

Hold the improved OZ investment for at least 10 years in order to pay zero tax on the capital gains of the OZ investment.

Applying these OZ rules to a Kukui’ula vacant homesite:

Purchase a Kukui’ula vacant homesite, for example, Aepo Nei Homesite 13 for $1,350,000, and hire a local general contractor who hires local subtrades to build a vacation rental home, at a cost of at least $1,350,000 within 30 months. The cost basis in the OZ investment in this example would be at least $2,700,000.

Then:

Hire a local property manager to vacation rent the OZ investment home to create the required business income, and hire local workers to maintain the home, its yard and swimming pool.

Then:

After at least 10 years, sell the OZ investment home. The capital gains on the sale of the home would be tax free to the OZ investor.

2025 Sales of Kukui’ula Homes from $3,675,000 to $16,700,000

Eighteen homes have sold at purchase prices ranging from $3,675,000 for the 3 bedroom 3 bath 1,700 sq ft garden view Kaulu Neighborhood Homesite 43, to $6,225,000 for the 4-bedroom 4.5 bath 2,816 sqft oceanview Kaimalino Neighborhood Homesite C, to $16,700,000 for the panoramic ocean coastline view 5 bedroom 5.5 bath 5,922 sqft Kula Makai Neighborhood Homesite J. Every buyer is required to pay the one-time club initiation fee which is currently $150,000. Its golf course, club house, restaurants, spa and other amenities are for the exclusive use of club members and their guests.

The potential appreciation of a Kukui’ula home together with the IRS-designated tax-free capital gains upon a QOF sale after a 10-year holding period, is an extraordinary investment opportunity.

South Kauai Vacation Rental Market is a Year Round Market

The Kukui’ula community with its private18-hole golf course, club house and spa, is located on Kauai’s sunny South Shore which features a temperate climate, beautiful white sand beaches, clean blue ocean water, and lush green upcountry hiking trails within a short drive. South Shore Kauai has been attracting vacationers year round for decades.

Kukui’ula tree-lined drive to its Clubhouse and Spa

There is a well-established demand for air-conditioned vacation homes with swimming pools on Kauai’s South Shore, and there are experienced local property management companies such as Hawaii Life Vacations to care for OZ investment homes and to produce the business income required under the 2018 Tax Cuts and Jobs Act.

One Big Beautiful Bill Act Extends Tax Incentive for Qualified Opportunity Zones

The July 2025 passing of the OBBB Act made the Qualified Opportunity Zones provisions permanent with some important changes:

New Qualified Opportunity Zones (QOZ) will be created every 10 years with a more targeted definition of low-income communities.

Governors will be asked to submit new Qualified Opportunity Zones by July 2026 for designation by the Department of the Treasury by January 1 2027.

The OBBB Act imposes additional reporting requirements with respect to QOZ investments including the value and location of QOZ investments and investor sales of Qualified Opportunity Fund (QOF) interests, and penalties for failures to comply.

Therefore those investors who can deploy capital gains before the December 31 2026 deadline will enjoy the current program’s more generous benefits.

All OZ signs are pointing to Kukui’ula Kauai.

Looking for Opportunity Zone property at Kukui’ula Kauai? Contact me, Lori Decker, Kauai Opportunity Zone specialist