If you’re in the market to buy or sell a house, you might be wondering how that will affect your taxes at the end of the year.
Brian Fay, a tax accountant, joined real estate attorney Justin Clark on “You Have Real Estate” to discuss how that might look, depending on each situation.
If you have a gain on a home, you would probably have to pay a profit on it -- especially if it’s a second home, Fay said, but added that it depends on whether its your primary residence or a secondary home.
“There are exceptions for your primary home, where you’re probably not going to have to pay taxes,” he said. “Your secondary home, you’re certainly going to have to pay capital gains on all of the gains of that, unless you structure it in a certain way.”
Fay said the IRS will also weigh whether the home is an investment asset or a business asset.
He discusses this, as well as a 1031 exchange, which is a way to structure a real estate transaction to basically defer the tax or gain on it to a future time.
Watch the video above to learn more.