Why 1031 Exchanges are Better than Qualified Opportunity Zones

1031 Exchange vs. Qualified Opportunity Zone

Qualified opportunity zones are a relatively new option for investors to defer their capital gains taxes by reinvesting their net proceeds from a sale into a qualified opportunity fund. These exist as an alternative to 1031 exchanges, but opportunity zones are not always a better option. In this article, we are going to explain why 1031 exchanges are a better tax-deferral option than qualified opportunity zones.

What is a Qualified Opportunity Zone?

A qualified opportunity zone allows investors to defer their capital gains taxes on the sale of property by reinvesting their capital into qualified opportunity zones. However, these taxes will eventually come due on December 31, 2026.

Benefits of a 1031 Exchange over a Qualified Opportunity Zone

A 1031 exchange is similar to a qualified opportunity zone in that they both offer tax-deferral. However, 1031 exchanges are different in some key ways that set them apart from opportunity zones. Unlike a qualified opportunity zone, a 1031 exchange has no set expiration date when your capital gains taxes come due. With a 1031, your deferred taxes are due when you sell your replacement property. However, you can defer those taxes once again if you set up your sale as a 1031 exchange. With this strategy you can effectively continue deferring your taxes until you die.

Set Up Your 1031 Exchange

Setting up your 1031 exchange is easy when you work with a qualified intermediary. At Commercial Partners Exchange Company, our intermediaries have more than two decades of experience facilitating exchanges of real estate. We can help you through the entire exchange process – answering all of your questions and preparing all of your required documents along the way. Contact us today to learn more about the exchange process and whether your property qualifies.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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