If you are a real estate investor it is in your interest to do your home work on 1031 exchange rules. It could save you many thousands of dollars in taxes, and could help you avoid many of the pitfalls and problems associated with 1031 exchanges. By doing a little research you can maximize and optimize your tax deferrals.

Dead line are by far the most important thing to know about 1031 exchange rules. It is crucial to purchase a new property within the given 180 days after you have sold your property. Further more, there is a 45 day period in which you must identify one of the properties you are attempting to exchange!

In order to increase your tax deferrals, all money from the sale of your property ought to be reinvested directly into a new property. The 1031 exchange rules explicitly explain that one cannot apply proceeds from this sale to pay off expenses that are not involved in the exchange. In order to obtain the maximum tax benefit out of these expenses, one should manage them separately in the settlement and include a footnote, then write a separate check to your buyer.

If you are a non-resident owner, in other words you live outside the state where the property is located, you may face a required withholding of a percentage of the sale price. This is to satisfy that state's tax revenue requirement. Many states have found it difficult to locate out of state owners so they require this fee up front.

The real property tax act of 1980 requires that foreigners withhold ten percent of the sales price for this reason. Some states will waive this requirement that it why it is very important to know your state's stand on this issue.

Trust only an experienced and qualified intermediary when it comes to handling the filing and the paperwork, as everything must be done in accordance with 1031 exchange rules. You can easily get 1031 exchange information online and locate the nearest competent intermediaries.

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