Ask Eli: When do you pay capital gains tax on property sale? [Video]

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Eli Residential channel. Enjoy!

Question: Do I need to purchase another home after I sell my current home to avoid paying taxes?

Answer: I often talk with people who conflate two different real estate tax concepts — the capital gains exemption and the 1031 exchange. A misunderstanding of these two very different concepts can lead to improper planning and avoidable mistakes so I’ll spend this week’s column helping you understand the difference.

One is for Primary Residence, One is for Investment Properties

The most basic difference is that the capital gains exemption applies specifically to the sale of a current or former (see details below for former) primary residence and the 1031 exchange applies specifically to the sale of an …