Strategic Guide: Why Oregon Property Owners Should Consider 1031 Exchanges into Tax-Free States

The Hidden Cost of "Just Holding" in Oregon

Your Starbucks owner client perfectly illustrates a common blind spot: contentment with the status quo often masks significant opportunity costs.

For a typical $3M NNN property generating $180,000/year:

  • Oregon state income tax (9.9%): ~$17,820/year
  • 10-year impact: $178,200
  • 20-year impact: $356,400+ (not including rent increases)

Why Exchange Out of Oregon

Moving to states like Texas or Florida increases net income ~10%. That’s ~$17,820/year more in your pocket on a $180k rent roll.
Oregon’s clawback only matters when selling. If you never sell, you collect rent income tax-free for decades in another state.
Use repeated 1031s + step-up in basis at death = no tax due. It's a powerful estate planning and wealth building strategy.

Overcoming Common Objections

"There’s Nothing Better to Exchange Into"

  • It’s about the same quality in a better tax climate.
  • Same tenant, same rent, more income in Texas or Florida.
  • Cap rates often higher in red states—better yield.

"It’s Too Much Hassle"

  • Professional help streamlines the process.
  • 60 days of effort = decades of increased income.
  • What’s harder: one exchange or 20 years of taxes?

Key Talking Points

Immediate Benefits

  • "In Texas, you keep the full rent. In Oregon, they take 10%."
  • "Same Starbucks, more cash flow—$1,485/month more."

Long-Term Wealth Building

  • "Redirect taxes into your wealth, not the state’s."
  • "Give your heirs income-producing assets, not tax liabilities."

Risk Mitigation

  • "Future-proof your income from tax increases."
  • "Red states often have better landlord protections."

The Professional Advisor's Approach

  • Quantify what they’re losing each year.
  • Simplify the 1031 process into bite-sized steps.
  • Emphasize client control and long-term benefits.
  • Frame it around family legacy and smarter holding strategies.

Client Action Steps

  1. Calculate current state tax cost
  2. Estimate 10–20 year savings by moving
  3. Identify ideal NNN assets in low/no-tax states
  4. Contact a Qualified Intermediary
  5. Visit and evaluate target markets

The Bottom Line

For long-term holders, exchanging into a no-income-tax state is a no-brainer. Even with Oregon’s Clawback provision, if they never sell, they win. And if they do sell, they’re no worse off—but enjoyed decades of tax-free income.

The question isn't "Why exchange?" but "Why keep funding Oregon’s tax system when you could be building your own wealth?"

A 1031 exchange isn't a hassle—it's a strategic wealth-building tool with monthly dividends.