A key topic that should be very important to real estate investing professionals is that of 1031 tax exchanges. If you are really serious about investing in real estate it will benefit you to study and learn the 1031 exchange rules in depth. This way you will be investing with the know how to get the best tax deferrals.

Deadlines are perhaps the most vital aspect to learning about 1031 exchange rules. You are obligated to purchase your replacement property only one hundred and eighty days following the transaction has been filed, or prior to the next filing cutoff. There is, however, a forty-five day identification time during which one can use one of three methods in order to identify which properties are under consideration for an exchange.

Your goal is to limit the total amount of deferred taxes. This can be accomplished by moving the entire amount into a new property investment. According to the tax code, "1031 exchange rules", it is not possible to take money generated from a sale, and use it for alternate, unrelated expenses. Therefore, you need to be particularly specific with your documentation. Keep a specific set of books dealing with the exchange, and write separate well documented checks for each part of the transaction.

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 sale of property by a foreigner is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). This act requires that the purchaser of a property withhold ten percent of the sales price under certain circumstances. Waiver rules may vary by state, so familiarize yourself with what is allowed in your location.

You need to employ a qualified intermediary who is able to fill out and file the necessary paperwork. Everything you do must be in accordance with the 1031 exchange rules. If you need more 1031 exchange information, you can look online, where you will also be able to locate qualified intermediaries in your area.

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If you are a real estate investor it is in your interest to do your homework 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. You are obligated to purchase your replacement property only one hundred and eighty days following the transaction has been filed, or prior to the next filing cutoff. You can easily get 1031 tax exchange information online and locate the nearest competent intermediaries.