The core differences
| 1031 Exchange | Opportunity Zone (QOF) | |
|---|---|---|
| What gains qualify | Only from selling investment real estate | Any capital gain — stocks, crypto, a business, real estate |
| How much to reinvest | Entire proceeds for full deferral | Only the gain — keep your original principal |
| Where the money goes | Any U.S. investment real estate | A fund investing in designated low-income census tracts, with substantial-improvement requirements |
| Reinvestment window | 45 days to identify, 180 to close | 180 days, no identification step |
| How long deferral lasts | Indefinite — exchange again, or hold till death for the step-up | Until a fixed recognition date set by statute — the original deferred gain eventually comes due |
| The bonus | Step-up at death can erase everything | Hold the fund 10+ years and the new appreciation inside it is tax-free |
How to think about the choice
Selling real estate, staying in real estate? The 1031 usually wins: indefinite deferral, any property anywhere, and the step-up endgame. The OZ deferral is a loan with a due date; the 1031's need never come due.
Selling stocks or a business? The 1031 isn't even eligible — opportunity zones are the only game for non-real-estate gains, and keeping your principal free is a genuine advantage.
The OZ's killer feature is prospective: a decade-plus hold makes the fund's own growth permanently tax-free — something 1031 never offers on new appreciation without the step-up. The trade-offs: your capital is confined to designated tracts and development-style projects, timelines are long, and fund quality varies enormously.
They can even combine: some investors 1031 their real estate gains indefinitely while routing stock gains into an opportunity fund. Different machines, different fuels.
Size the gain you're deciding about →Both strategies start from the same number — your tax bill on a plain sale