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.

The most important thing to know about 1031 exchange rules are the deadlines. You must purchase a replacement property within one hundred and eighty days after the sale has been registered or before the next filing deadline. But there is also a forty five day identification period in which time you must use one of three methods to identify properties that you are considering 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 live in a different state to where the property is sold, many states mandate that the closing agent or real estate agent must withhold a percentage of the sale price to make sure that the state receives any tax revenue due, because tracking down these non residents later can be very difficult.

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.

You will use a qualified intermediary to complete the required paperwork and follow the 1031 exchange rules. Do a search on the Internet and you will find a lot of data regarding 1031 exchange information. The Internet is also a resource for finding a qualified intermediary for your state.

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As a real estate investor, you must understand 1031 exchange rules to save significantly on your taxes. 1031 exchanges require you purchase your replacement property one hundred and eighty days after filing a transaction. For the best tax deferral, invest all of your money from the sale of your property into the new property that you buy. If you buy in a new state, you will need your broker to withhold a percentage of the sale for you tax bill. As you look for someone to assist you, only put your faith in a qualified intermediary. Search for 1031 tax exchange information online and select someone who can help.