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If you have money invested in property, you should look very carefully into the 1031 exchange rules. You could see a significant reduction in your tax bill and avoid any difficulties in utilizing 1031 tax exchanges. If you expend a bit of time and effort on checking these out, you can really make the most of your tax deferrals.
Dead line are by far the most important thing to know about 1031 tax 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!
The 1031 tax exchange rules require that you not use any profits from the sale for anything unrelated to the exchange. These expenses should be an addendum to the settlement with a check for such being written to the buyer at settlement. For your best tax deferral you need to spend all of the cash from the sale of your property in the newly purchased property.
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 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 will use a qualified intermediary to complete the required paperwork and follow the 1031 tax 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.
To get your own unique copy of this article to put on your site just go to http://www.investing-secrets.com/1031-exchange/recommends/article-1031
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.
- David E. Williams
