QOZ Substantial Improvement Test Calculator

QOZ substantial improvement requires doubling basis in 30 months.

Acquisition cost

Land allocation %

Planned capex

Months to completion

Improvement gap

Required improvement

$7,000,000

Test result

PASS

How the math works

Building basis = acquisition × (1 − land %). Required = building basis. Gap = required − capex.

$10M × 70% = $7M building basis. Need $7M capex. $8M planned = $1M excess. 24 mo < 30 mo PASS.

How to Use

Enter property acquisition cost.
Enter land allocation %.
Enter planned capex.
Enter months to completion.
Read improvement test result.

Frequently Asked Questions

What is substantial improvement?

QOZ rule requiring existing property acquired by QOZ fund to receive improvements equal to or greater than the building basis (excluding land) within 30 months of acquisition. Effectively doubles the building basis. Designed to ensure QOZ investment creates meaningful economic activity vs passive arbitrage. Ground-up construction automatically meets this (no prior basis).

How is basis calculated?

Acquisition cost allocated between land (not subject to doubling) and building (must be doubled). Typical allocation: 20-40% land, 60-80% building depending on market. Example: $10M acquisition, 30% land = $3M land, $7M building. Improvement required: $7M capex over 30 months. $3M land excluded from test.

Typical improvement plans?

(1) Value-add renovation: major systems, unit renovations, amenity upgrades. Works for apartments, offices, retail. (2) Structural overhaul: adding floors, changing use, reconfiguring layout. (3) Brand refresh: Fortune 500 TI for attracted tenant. Plan must be documented before 30 months end. Operators use engineering/cost reports to track and document compliance.

Consequences of failing?

Property disqualified from QOZ benefits. Deferred gains become immediately taxable. Tax penalties. Interest on delayed taxes. Loss of future 10-year exit benefit. Financial impact: typically $2-10M+ on mid-size deals. Extension possible for delays beyond sponsor control (weather, permit issues, supply chain) but limited. Track diligently.