Question 1

Is it better to rent out my house or sell it?

Accepted Answer

It depends on three numbers: the after-tax proceeds if you sell today, the after-tax cash flow the property produces as a rental, and what you would earn on the proceeds if you sold and invested them instead. Holding is a leveraged bet on appreciation plus a tax-sheltered income stream, so the answer usually turns on the appreciation rate you actually believe.

Question 2

What is depreciation recapture and why does it matter?

Accepted Answer

While a property is a rental you deduct depreciation, which lowers your taxable income. When you sell, the IRS recaptures that benefit and taxes it at up to 25 percent federal. Critically, the Section 121 primary residence exclusion does not shelter recapture, so it is owed even on a home that otherwise qualifies for the exclusion.

Question 3

Do I lose the home sale tax exclusion if I rent my house out?

Accepted Answer

Section 121 generally requires that you owned and lived in the home as your primary residence for two of the five years before the sale. Renting it out for more than roughly three years means you no longer meet the two-of-five test and the exclusion, worth up to $250,000 single or $500,000 married filing jointly, is lost. This is often the largest single number in the decision.

Question 4

What is a 1031 exchange and should I consider one?

Accepted Answer

A 1031 like-kind exchange lets you defer the entire tax bill by rolling the proceeds of an investment property into another investment property within strict deadlines. It does not apply to a primary residence. If you have a large deferred gain and want to stay in real estate, it can change this analysis materially and is worth discussing with a qualified intermediary and your CPA before you list.

Rent It or Sell It

The Property Today

As a Rental

Horizon & Growth

Tax Position

The Decision

The numbers that drive it

Full After-Tax Comparison Pro

If you hold, who manages it?