In simple terms: Yes, 1031 funds can fund property improvements, but you must follow strict rules so those improvements count toward your tax-deferred exchange.

An Improvement Exchange allows the investor to construct the “perfect” replacement property in order to acquire precisely what is desired. Improvements can be as simple as repairs to existing structures or as complex as ground-up new construction.

Learn about using 1031 Improvement Exchange on property already owned and how to maximize tax deferral benefits while making improvements.

No. Improvements to the property you're selling raise your basis and reduce your gain, but they don't change the rule that your replacement property must be equal or greater in value than the sale price.

The Improvement Exchange opens up many opportunities to the savvy investor, even the possibility of improvements to property already owned. While escrow holdbacks or pre-payment of labor and materials are natural paths in getting improvements done, they do not qualify for tax deferral.

Learn how to execute a 1031 improvement exchange on property already owned, unlocking tax benefits and increasing property value.

Before attempting a 1031 exchange into a property you already own, familiarize yourself with the requirements, and understand the complexity of leasehold improvement exchanges.

A 1031 exchange gets its name from Section 1031 of the IRS code. In plain terms, it lets you sell an investment property, reinvest the proceeds in a like-kind property, and put off the capital gains tax.

A build-to-suit 1031 exchange lets you use your exchange funds to improve or construct on replacement property. Learn the 180-day rule, execution risks, and how improvements affect your exchange value.

The 1031 improvement exchange is reported on IRS Form 8824, Like-Kind Exchanges, filed with the taxpayer’s Form 1040 for the year in which the relinquished property was sold.