Exploring the financial impacts of selling vs. renting your property.
“Should I sell my property, or should I rent it out?” This decision depends on various factors, including the potential financial implications of each choice.
One key aspect to consider is the tax benefit associated with selling your primary residence. If you’ve lived in your home for two out of the last five years, the gain from selling it can be tax-free—up to $250,000 for singles and $500,000 for married couples. This is a significant advantage as it’s rare to receive tax-free gains from the government.
To determine your gain, subtract the original purchase price from the selling price and account for any associated fees like broker or legal fees. For example, if you bought your home for $300,000 and are selling it for $500,000, your gain might be around $175,000 after deductions. If you meet the residency requirement, this gain could be tax-free.
“This decision depends on various factors.”
On the other hand, renting out your property changes the situation. While you can start depreciating the property and may receive rental income, you begin to erode the potential tax savings you would have gained from selling. It’s essential to calculate how long you would need to rent the property to offset the tax-free gain from selling.
Ultimately, the decision requires careful consideration and some number crunching. Think about how long it would take for the rental income to equal the tax-free gain from selling. Often, this period can be 10 to 12 years, so you’ll need to decide if renting is worth it in your situation.
Always remember, as a seller, you could benefit from a tax-free gain, but it’s wise to consult with your accountant on this matter. If you have any questions or need guidance in making this decision, feel free to call or email. I’m here to help you navigate these crucial real estate decisions. I look forward to assisting you soon.
