How Opportunity Zones Differ From 1031 Exchanges

Performance Property Real Estate Question

Q: I read that the new opportunity zones allow investors to avoid paying capital gains taxes-how are opportunity zones different from 1031 exchanges? Eugene, Cleveland, OH

A: 1031 exchanges require an intermediary to hold onto proceeds that result from the sale of property while the seller lines up another investment, whereas funds invested in opportunity zones don’t need to be kept separate–investors just have to file Form 8949 with their income taxes. Another difference between opportunity zones and 1031 exchanges, which allow real estate investors to defer taxes on capital gains from the sale of property by reinvesting the proceeds from the sale into another property within 180 days is that 1031 exchanges don’t allow investors to permanently exclude profit from taxes while opportunity zones do so long as the investment has been held in a qualified opportunity fund located in any of the certified opportunity zones in the US which are in specified economically disadvantaged areas for at least 10 years. The rules of the opportunity zone program are complex and have not been finalized by the US government. Thanks for your question, Eugene.

For more real estate tips and information visit my blog at