A sound knowledge of 1031 exchange rules is extremely useful and important to real estate investing entrepreneurs. If the rules are studied and implemented in the right way it will save you lots of money in taxes! By simply doing some research you will increase profit and avoid problems associated with 1031 exchanges.

The 1031 exchange rules need to be followed closely. Deadlines are very important. You are required to buy new real estate by 180 days prior to registration of the sale and prior to the next filing deadline. Another catch is that there is a 45 day identification time period for you to decide which of three methods you want to use to mark properties you are interested in for exchange.

To maximize your tax deferrals, all of the cash from the sale of the property must be reinvested into the new property. The 1031 exchange rules state that you cannot use proceeds from the sale to pay for expenses that are not part of the exchange. To get the maximum tax benefit from these expenses you should handle them on a separate part of the settlement and footnote them and write a separate check to the buyer.

If you happen to reside in a different state from where the property is, be aware that some states mandate that your closing agent or real estate agent is legally obliged to hold back a percentage of your sale price in order to ensure that the state gets any tax revenues that it is due, given that hunting down such non-residents at a later date becomes increasingly difficult.

The real property tax act of 1980 as it pertains to foreigners requires that at least ten percent of the sales price must be withheld for this purpose. This withholding requirement can be waived depending on the state, so it's important to check your state's individual rules.

You must use a qualified intermediary who completes all the necessary paperwork and filing and must adhere to the 1031 exchange rules. There are many places on the internet where you can find 1031 exchange information and you can even find qualified intermediaries in your state.

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If you're a real estate investor, you simply have to study your 1031 exchange rules. It could save you literally thousands of dollars in taxes, and could help you avoid many of the pitfalls associated with 1031 exchanges. By doing a little research you can maximize your tax deferrals. You must purchase your replacement property only 180 days after the transaction, and all of the money from the sale of your old property must be reinvested in the new property. Go online to find the most current 1031 tax exchange information and find a qualified intermediary to help you with the paperwork.