--- title: "Tax Deferral: What it Is and How to Use It" description: "Learn more about tax deferral: what it is and how to use it." image: https://www.realized1031.com/hubfs/iStock-1746639182-modified-81910e99-0e75-4e13-be5c-5ae8b836d5ff.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Tax Deferral: What it Is and How to Use It Posted Apr 24, 2025 ![iS-1746639182](https://www.realized1031.com/hs-fs/hubfs/iStock-1746639182-modified-81910e99-0e75-4e13-be5c-5ae8b836d5ff.jpg?width=6578&height=3701&name=iStock-1746639182-modified-81910e99-0e75-4e13-be5c-5ae8b836d5ff.jpg) If you own investment property, tax deferral strategies could be a viable method of maximizing wealth and optimizing financial planning depending on your investment goals and tax situation. Understanding [tax deferral ](https://www.realized1031.com/blog/what-is-a-tax-deferral)could help you determine approaches to dealing with income and appreciation in connection with your real estate portfolio. ### The Tax-Deferral Definition A [tax-deferred ](https://www.realized1031.com/blog/tax-implications-of-a-delaware-statutory-trust-1?hs_preview=kIpIDVdR-187825016751)approach delays tax payments on income or capital gains to a future date. When dealing with real estate, common tax deferral approaches include: - *The 1031 Exchange*. Section 1031 of the Internal Revenue Code can help you defer capital gains taxes and depreciation recapture if you sell an investment or business property and invest the proceeds into a like-kind property of equal or greater value. - *Delaware Statutory Trusts (DSTs)*. When used with a 1031 exchange, DSTs allow fractional real estate ownership with tax-deferred benefits while removing active management responsibilities. - *Qualified Opportunity Zones (QOZs)*. You could defer and potentially reduce capital gains taxes by reinvesting profit from asset sales into government-designated Opportunity Zones. The program promotes economic development in lower-income areas. ### The Pros and Cons of Tax Deferral On the surface, tax deferrals can offer many benefits, including the following: *More capital to reinvest*. A tax deferral strategy can let you keep the money that might otherwise go to taxes. You could use those funds to acquire new assets or diversify your portfolio, potentially boosting long-term[ wealth accumulation](https://www.realized1031.com/blog/wealth-management-what-it-is-what-it-costs-when-to-use). *Tax rate optimization*. With careful planning, the tax deferral approach could help you time tax payments for when you’re in a lower income tax bracket. This might reduce what you owe to the IRS. *Estate planning advantages*. If you’re planning to pass DST shares or other real estate to your heirs, a tax deferral approach could help preserve their wealth. For example, assets acquired through a 1031 exchange might be eligible for a step-up in basis when passed on, potentially eliminating capital gains taxes for the heirs. However, there are drawbacks to tax deferral strategies: *You could owe more*. Tax deferral doesn’t get rid of taxes. The process puts off what you owe until you sell a property or a DST dissolves. Depending on the property appreciation amount and your tax bracket, you might pay more taxes through a deferral strategy rather than paying them upfront. *Deferral strategies are complex*. A successful 1031 exchange means compliance with stringent IRS rules. The process also involves extra costs, including Qualified Intermediary fees. There are also specific rules for Opportunity Zone investments. ### Yes or No? Deciding to Use a Tax-Deferral Approach Tax deferral strategies can help with financial growth, capital reinvestment, and long-term wealth preservation. However, you could end up owing more money. Additionally, relying on 1031 exchanges, [DSTs](https://www.realized1031.com/blog/decoding-financial-statements-when-exchanging-dsts-into-reit-shares-via-section-721), and QOZ to defer taxes requires strict compliance with rules and regulations. A tax deferral strategy decision requires thought and advice from your CPA, real estate broker, or attorney. If you decide to proceed, consider contacting the professionals at Realized 1031 for assistance with 1031 exchanges, DSTs, and other approaches. For more information, visit [realized1031.com](http://realized1031.com/). *The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.* Learn Ways to Help Reduce or Defer Taxes [![Learn Tax-Deferred Strategies](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-250b.png?width=250&height=295&name=IPWM-Tax-ebook-250b.png "Discover ways to potentially ...") ](https://www.realized1031.com/blog/tax-deferral-what-it-is-and-how-to-use-it#blogform) Download eBook ---   --- ### Learn Tax-Deferred Strategies ![Learn Ways to Help Reduce or Defer Taxes](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-550a.jpg?width=550&height=600&name=IPWM-Tax-ebook-550a.jpg) Discover ways to potentially grow wealth by managing taxes. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "If you own investment property, tax deferral strategies could be a viable method of maximizing wealth and optimizing financial planning depending on your investment goals and tax situation. Understanding tax deferral could help you determine approaches to dealing with income and appreciation in connection with your real estate portfolio. The Tax-Deferral Definition A tax-deferred approach delays tax payments on income or capital gains to a future date. When dealing with real estate, common tax deferral approaches include: The 1031 Exchange. Section 1031 of the Internal Revenue Code can help you defer capital gains taxes and depreciation recapture if you sell an investment or business property and invest the proceeds into a like-kind property of equal or greater value. Delaware Statutory Trusts (DSTs). When used with a 1031 exchange, DSTs allow fractional real estate ownership with tax-deferred benefits while removing active management responsibilities. Qualified Opportunity Zones (QOZs). You could defer and potentially reduce capital gains taxes by reinvesting profit from asset sales into government-designated Opportunity Zones. The program promotes economic development in lower-income areas. The Pros and Cons of Tax Deferral On the surface, tax deferrals can offer many benefits, including the following: More capital to reinvest. A tax deferral strategy can let you keep the money that might otherwise go to taxes. You could use those funds to acquire new assets or diversify your portfolio, potentially boosting long-term wealth accumulation. Tax rate optimization. With careful planning, the tax deferral approach could help you time tax payments for when you’re in a lower income tax bracket. This might reduce what you owe to the IRS. Estate planning advantages. If you’re planning to pass DST shares or other real estate to your heirs, a tax deferral approach could help preserve their wealth. For example, assets acquired through a 1031 exchange might be eligible for a step-up in basis when passed on, potentially eliminating capital gains taxes for the heirs. However, there are drawbacks to tax deferral strategies: You could owe more. Tax deferral doesn’t get rid of taxes. The process puts off what you owe until you sell a property or a DST dissolves. Depending on the property appreciation amount and your tax bracket, you might pay more taxes through a deferral strategy rather than paying them upfront. Deferral strategies are complex. A successful 1031 exchange means compliance with stringent IRS rules. The process also involves extra costs, including Qualified Intermediary fees. There are also specific rules for Opportunity Zone investments. Yes or No? Deciding to Use a Tax-Deferral Approach Tax deferral strategies can help with financial growth, capital reinvestment, and long-term wealth preservation. However, you could end up owing more money. Additionally, relying on 1031 exchanges, DSTs, and QOZ to defer taxes requires strict compliance with rules and regulations. A tax deferral strategy decision requires thought and advice from your CPA, real estate broker, or attorney. If you decide to proceed, consider contacting the professionals at Realized 1031 for assistance with 1031 exchanges, DSTs, and other approaches. For more information, visit realized1031.com. The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.", "articleSection" : [ "Tax" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2025-04-24T14:00:03+0000", "datePublished" : "2025-04-24T14:00:03+0000", "description" : "Learn more about tax deferral: what it is and how to use it.\n", "headline" : "Tax Deferral: What it Is and How to Use It", "image" : { "@type" : "ImageObject", "height" : 3701, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1746639182-modified-81910e99-0e75-4e13-be5c-5ae8b836d5ff.jpg", "width" : 6578 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/tax-deferral-what-it-is-and-how-to-use-it", "name" : "Tax Deferral: What it Is and How to Use It", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1746639182-modified-81910e99-0e75-4e13-be5c-5ae8b836d5ff.jpg" } ```