1031 exchange improvements question

[Cynthia Hanke]

Selling a property and buying another. Going 1031 exchange route. Can't seem to find out about putting money into each house. If I make improvements to the one I'm selling ($5000k in wood floor refinishing and some carpet) do I get to take that off taxes? Replacement house needs new windows, concrete steps, patio roof, backyard fence. How can I get those things done from the profit of the house being sold? To reduce capital gains? New house is going to be $35k LESS than the one I'm selling. Thanks

[Jaron Walling]

@Cynthia Hanke The property you're exchanging into can't be less than the first one. You're going to pay taxes on the difference if that's the case ($35k). The 1031 exchange is a powerful tool but it needs to completed correctly for it to benefit you. 

"According to the IRS when the replacement property is acquired, the exchange is complete. Any subsequent expenditure of funds to pay for repairs is treated as though the taxpayer received cash and paid for the repairs after completion of the purchase. Repair expenses are non-exchange expenses and payment with exchange funds results in taxable income to the exchanger."