Opportunity Zone vs 1031

Homeowner · San Jose · Member since 2019 · 8 posts · 2 votes

We may have up to 500k in equity in a rental house that we plan to sell. I found a multi unit property in an opportunity zone. Where do I go to find out how the tax deferral works? I’ve read up on it but am a bit overwhelmed. Any help appreciated explaining the benefits of opportunity zone vs 1031. Thanks!

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Natalie KolodijBusiness Member

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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

Originally posted by @Carlos Ptriawan:

You need to invest all the capital gains (not just the net sales proceed). Best route is you go to CPA and got your number from them.

100% Tax Deferral if you don't touch the money for 10 years. 10% tax discount if you plan to withdraw on 2026. The last date you can invest in OZ is the end of 2021.

This is all wrong.

With a 1031 you need to invest full proceeds- with the QOZ you ONLY need to invest the gain.

It's not 100% tax deferral at 10 years- Your INITIAL gain is recognized when you sell or at the end of 2026- and at this point you can receive up to a 10% reduciton in that gain.

Any NEW gains generated in the asset you buy can be 100% tax free if you hold it 10 years.

And you can absolutely invest after 2021 you just lose some of the benefits.

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Dave DeMarinis
Lender · Santa Rosa, CA · Member since 2017 · 283 posts · 255 votes
6y
@Greg Dickerson @Natalie Kolodij Is it true the Depreciation Recapture is also deferred AND discounted the 10% if hold period met? I thought the deferral and discount ONLY applied to Capital Gains and not to Depreciation Recapture.
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