Did the One Big Beautiful Bill Act change 1031 exchanges?

No. OBBBA was signed July 4, 2025 and left Section 1031 fully intact — no dollar cap, no income limit, no transaction limit. Proposals to cap annual deferral at $500,000 per taxpayer have surfaced repeatedly, including in the 2021 Build Back Better bill that passed the House before stalling, but none was enacted. The operative rules are unchanged: real property held for investment or business use, 45-day identification, 180-day exchange period, a qualified intermediary, and reporting on Form 8824.

What changes for Opportunity Zones in 2027?

OBBBA made the Opportunity Zone program permanent and enhanced its benefits for investments made on or after January 1, 2027. Under the permanent program, deferred gain is generally recognized on the earlier of a sale or five years after the investment date, with a 10% basis step-up available for a full five-year hold. Investments in a Qualified Rural Opportunity Fund may receive a larger 30% basis step-up and a reduced substantial improvement threshold of 50% of basis. Zone designations will be refreshed by governors every ten years.

What is the main difference between a 1031 exchange and an Opportunity Zone investment?

What they accept and what they deliver. A 1031 exchange only works for gain from real property, requires you to reinvest the entire sale proceeds including the debt, and defers gain indefinitely — potentially forever if the property is held until death and receives a stepped-up basis. A Qualified Opportunity Fund accepts capital gain from any asset — stock, crypto, a business sale, a property flip — requires only the gain to be reinvested rather than the full proceeds, and offers exclusion of appreciation on the OZ investment itself after a ten-year hold.

Can I do a 1031 exchange and an Opportunity Zone investment on the same sale?

Not for the same dollars of gain, but the two can be sequenced or split across separate transactions. An owner selling real property generally chooses one path for that gain. Where the two genuinely complement each other is across a portfolio: use 1031 for real-property-to-real-property gains where you want to keep owning real estate, and use a Qualified Opportunity Fund for gains that Section 1031 cannot touch — a business sale, a securities position, or a property that was held primarily for sale and therefore ineligible for exchange treatment.

Should I wait until 2027 to invest in an Opportunity Zone?

It depends entirely on when your gain occurs and whether you can afford to wait, and it is a question for your CPA rather than a general rule. The enhanced benefits — including the basis step-up structure and the rural fund advantages — attach to investments made on or after January 1, 2027, so a gain realized in late 2026 may face a genuine timing decision. But Opportunity Zone investing carries its own execution risk, requires substantial improvement of the property, and concentrates capital in designated areas. Do not let a tax feature drive a real estate decision that does not stand on its own.

Tax Strategy · September 25, 2026 · Steven Owen

1031 exchange vs. Opportunity Zone: what changes on January 1, 2027

The One Big Beautiful Bill Act, signed July 4, 2025, did two things that matter here: it left Section 1031 completely alone, and it made Opportunity Zones permanent with better terms starting January 1, 2027. For a real estate owner, 1031 remains the default — it defers gain indefinitely and, if the replacement property is held until death, that deferral can become permanent through a stepped-up basis. Opportunity Zones do something 1031 cannot: they accept capital gain from any asset, require only the gain rather than the full proceeds to be reinvested, and can eliminate tax on the new investment’s appreciation after ten years. They are not competitors so much as tools for different gains.

What OBBBA did and did not do

The headline for exchangers is the absence of a headline. Section 1031 emerged from the 2025 tax bill fully intact: no dollar cap on annual deferral, no income limitation, no transaction limit. That is worth stating plainly because proposals to cap it keep resurfacing — the 2021 Build Back Better bill would have limited deferral to $500,000 per taxpayer per year and passed the House before stalling in the Senate. It did not become law, and nothing like it made it into OBBBA.

The operative rules are the ones that have governed since the 2017 tax act narrowed Section 1031 to real property: investment or business-use real property, 45 days to identify and 180 days to close, a qualified intermediary, and reporting on Form 8824.

Opportunity Zones went the other way — from a program with a scheduled sunset to a permanent one, with a redesigned benefit structure and a deliberate tilt toward rural areas.

The 2027 Opportunity Zone rules

Feature	Investments on or after Jan 1, 2027
Program status	Permanent, with zones redesignated by governors every ten years
Deferral	Gain generally recognized on the earlier of a sale or five years after the investment date
Basis step-up	10% for a full five-year hold
Rural funds (QROF)	30% basis step-up, and a reduced substantial improvement threshold of 50% of basis
Long-term benefit	Exclusion of appreciation on the QOF investment after a ten-year hold

The rural provision is the one worth flagging for a Texas audience. A 30% basis step-up versus 10%, combined with a substantial improvement threshold cut in half, materially changes the math on rural and small-town deals — and Texas has a great deal of eligible geography. Zone maps will be redrawn, so which specific tracts qualify under the permanent program is a question to revisit when designations are published rather than to assume from the current map.

The structural differences

	1031 exchange	Qualified Opportunity Fund
What gain qualifies	Only gain from real property held for investment or business	Capital gain from any asset — stock, crypto, business sale, flip
What must be reinvested	The full sale proceeds, and you must replace the debt too	Only the gain — you keep your basis
Tax outcome	Deferral, indefinitely; potentially permanent via step-up at death	Deferral to a recognition date, partial step-up, then exclusion of new appreciation after 10 years
Deadline to act	45 days to identify, 180 to close	Generally 180 days from realization to invest in a QOF
What you own	Real property you control	An interest in a fund, usually passive
Work required	Find and close a replacement property	Fund must substantially improve the property or operate a qualifying business
Geography	Anywhere in the United States	Only designated zones

Two rows carry most of the decision. “What gain qualifies” is why this is rarely a real either-or for a property owner: if you are selling investment real estate, 1031 is available and OZ is an alternative; if you are selling a business, a stock position or a property you held primarily for sale, 1031 is unavailable and OZ may be the only deferral tool you have.

“What must be reinvested” is the underrated one. A 1031 requires you to roll everything — full proceeds plus replacement debt — or you generate boot. A QOF only requires the gain. An owner with a low basis and a large gain finds these nearly equivalent; an owner with a high basis can keep substantial capital out of the OZ investment entirely.

Where each one wins

1031 wins when you are selling real estate and want to keep owning real estate you control; when you want to defer indefinitely rather than to a fixed recognition date; when your heirs’ stepped-up basis is part of the plan; and when the replacement asset should be chosen on its own merits rather than constrained to a map. For most of the owners we work with, this is simply the answer.

Opportunity Zones win when the gain is not from real property and 1031 is therefore off the table; when you want to reinvest only the gain and keep your basis liquid; when the expected appreciation on the new investment is large enough that excluding it after ten years is worth more than deferring the old gain; and when a specific zone deal is one you would do anyway on the fundamentals.

That last clause is the discipline that matters. A basis step-up does not rescue a bad project. Every Opportunity Zone investment still has to work as real estate, in a designated tract, with a substantial improvement requirement attached — which means real construction risk on top of the usual risks.

The timing question

Because the enhanced benefits attach to investments made on or after January 1, 2027, gains realized in late 2026 sit in an awkward spot: invest now under the current rules, or wait for the permanent program. The honest answer is that it depends on your realization date, your 180-day window, whether a suitable deal exists in either period, and your CPA’s read on your specific facts. What we would caution against is the reflex to hold a sale hostage to a tax feature. Markets move faster than tax calendars, and a property sold into a weaker market in 2027 to capture a 10% basis step-up can easily be a worse outcome than a clean sale in 2026.

The same caution applies to 1031. The persistent chatter about capping like-kind exchanges has been used as a sales argument for years — “exchange now before they take it away.” It survived 2025 untouched. Decide on the real estate; use the tax code to make a good decision better, not to manufacture urgency.

How SCORE helps

Steven Owen is an Austin commercial real estate Agent who underwrites the property first and the tax structure second. SCORE runs the real estate analysis — what the replacement asset is worth, what it will actually earn, what the debt looks like — and works alongside your CPA and qualified intermediary, who own the tax call. If the answer is a 1031, we source and close it. If your gain is not 1031-eligible, we will say so rather than force it. See 1031 exchange services and development land.

Gain coming, and not sure which tool fits?

Tell us what you are selling and roughly what the gain looks like. We’ll frame the real estate side clearly so the conversation with your CPA is a short one.

Talk to Steven 1031 services

This article is general information for commercial real estate owners and investors, not tax or legal advice. Section 1031 is federal tax law and its application depends on facts specific to you and your property. Before starting an exchange, engage a qualified intermediary and confirm treatment with your CPA or tax counsel — SCORE Property Group and Steven Owen are real estate professionals, not tax advisors, and do not act as a qualified intermediary. Authorities referenced: Internal Revenue Code §1031 as amended by the Tax Cuts and Jobs Act (real property only, effective 2018) and left unchanged by the One Big Beautiful Bill Act signed July 4, 2025; Treas. Reg. §1.1031(k)-1; Rev. Proc. 2000-37; Rev. Rul. 2004-86; IRS Form 8824. Verified as of September 25, 2026. Opportunity Zone provisions described reflect the One Big Beautiful Bill Act as reported through September 2026; zone designations under the permanent program and implementing guidance are subject to change, and eligibility for any basis step-up depends on facts specific to the investor and the fund. Confirm with your CPA or tax counsel. Related: How a 1031 exchange works in Texas · The 45-day and 180-day deadlines · 1031 exchanges and land · DSTs and net lease.