How to use the sell or rent calculator
- Start from the example. Every field is filled with an editable example, so you see a result straight away. Replace the essential numbers with yours: today’s value (recent sales of similar homes nearby, or an agent’s estimate), and the balance, rate and years left from your latest mortgage statement.
- Enter a realistic rent and how many years you’d rent before selling.
- Say whether it’s your main home and how long you’ve lived there. This drives the tax on the sale.
- Open Advanced assumptions to set your purchase price, running costs, growth rates and tax rates. Each one is labeled with what it means.
- Copy the link to save or share your numbers. Nothing is stored or sent anywhere.
How to estimate the rent
Search rental listings for homes near yours with the same number of bedrooms, similar size and similar condition. Look at several, not one. Listings show asking rent, which can be higher than what homes actually rent for, so lean toward the middle and notice how long listings stay up. A local property manager will usually estimate the rent for free. If you’re unsure, enter a figure about 5–10% below the listings and see whether the verdict changes.
How to read the results
The verdict compares your total wealth at the end of the rental period. “Selling” means you sell today, pay off the mortgage and any tax, and invest the cash at the return you set. “Renting” means you rent the home for the years you chose, invest any spare cash at that same return, then sell. If the two are within 2% of each other, the calculator says it’s too close to call, because small changes in assumptions you can’t know would flip it.
Break-even rent is the starting monthly rent at which both paths come out equal, with every other input unchanged. If you’re confident you can rent above it, renting comes out ahead in this model. It’s the most practical number on the page: compare it with real listings.
The chart and year-by-year table show what you’d have if you sold at the end of each year. A sudden drop in the renting line usually marks the year the main-home exclusion runs out. The table shows rent collected, costs, mortgage payments, tax on rental income, cash flow, home value, equity and both wealth figures.
The sensitivity tables rerun the model with different rent, appreciation and investment returns. If the winner changes across the table, the decision depends on things nobody can predict, and the non-financial points below should weigh more.
What actually decides rent vs sell
Your mortgage rate vs what the money could earn
Keeping the house keeps the loan. If your rate is well below the after-tax return you’d expect from investing the sale proceeds, the cheap debt is worth keeping. If it’s close to or above that return, paying it off by selling is a guaranteed “return” at your mortgage rate.
Rent compared with your total monthly cost
Add the mortgage payment, property tax, insurance, HOA, maintenance (often about 1% of the home’s value a year), management and a vacancy allowance. If rent doesn’t cover that, you’re paying to keep the house every month, and only appreciation can make up the difference.
Selling costs
Agent commission and closing costs often run 6–10% of the price, so 7% of a $450,000 home is $31,500. Renting doesn’t avoid that; it delays it, and you pay it later on what you hope is a higher price.
Appreciation and leverage
A 3% rise on a $450,000 home is $13,500 a year, even if your equity is only $150,000. That leverage is why renting often wins on paper with modest rent. It also works in reverse when prices fall.
Taxes
Selling a main home you’ve lived in for 2 of the last 5 years can be tax-free up to the exclusion cap. Renting adds tax on rental profit and, when you sell, tax on depreciation, and after about 3 years it can cost you the exclusion. The tax section below covers each rule.
Your time and risk
A rental is a small business. The model can’t price the calls at night, the months with no tenant, or how much you’d mind them.
What the numbers leave out
- Landlord work and vacancy risk. Screening, leases, repairs and turnover take time. One bad tenant or a long vacancy can wipe out a year of profit.
- Liquidity. Equity in a rental is hard to reach quickly. Selling gives you cash you can use for a next home or an emergency.
- Concentration. Keeping the house puts a large share of your net worth in one property in one town.
- Insurance and local law. You’ll need a landlord policy. Landlord-tenant law, deposits, eviction rules and rental permits vary by state and city.
- Your mortgage and HOA. Some loans require you to live in the home for a period after closing, and some HOAs restrict rentals. Check before you list it.
Taxes when you rent out a home you lived in
These are the federal rules the calculator applies, checked for the 2026 tax year. State income tax may also apply; add your state rate to the rates under Advanced assumptions.
The main-home exclusion and the 2-out-of-5-year rule
When you sell a home you’ve owned and lived in as your main home for at least 2 of the 5 years before the sale, you can exclude up to $250,000 of gain from income, or $500,000 if you’re married filing jointly. For the joint amount, both spouses must meet the use test, and generally neither can have used the exclusion on another home in the previous 2 years. The two years don’t have to be in a row, and these amounts are not adjusted for inflation (IRS Publication 523, Topic 701).
The 3-year cliff
The 5-year window ends on the day the sale closes, so it moves forward while you rent. If you lived in the home right up to moving out, your 2 years of use stay inside the window for 3 years after you move out. Sell within that time and the full exclusion can still apply; the rental years after you moved out don’t reduce it. Sell later and you fail the test, so the whole gain becomes taxable, not a share of it. The test counts days (730 in the 5 years), so plan to close with a margin, not on the anniversary. If you lived there for less than 2 years, you may qualify for a partial exclusion after a job move, health reasons or other unforeseen events; the calculator doesn’t model that (Publication 523).
Depreciation, and the tax on it when you sell
As a rental, you deduct depreciation on the building (not the land) over 27.5 years. The starting basis is the lower of your adjusted basis (purchase price plus improvements) or the home’s market value on the day you convert it (IRS Publication 527). Depreciation also lowers your basis. When you sell, the part of the gain equal to the depreciation you took, or were entitled to take, is “unrecaptured section 1250 gain”. It’s taxed at your ordinary rate, capped at 25% (Topic 409), and the main-home exclusion never covers it, even if you sell inside the 3-year window (Publication 523).
Tax on rental income
Rent minus operating costs, mortgage interest, property tax and depreciation is taxed as ordinary income. Principal payments aren’t deductible. If the result is a loss, passive-activity rules limit how much you can deduct against other income. There’s a special allowance of up to $25,000 if you actively take part, phasing out as modified AGI rises from $100,000 to $150,000 (Publication 925). The calculator treats a loss year as zero tax and doesn’t carry losses forward, which slightly favors selling.
Capital gains rates and the 3.8% NIIT
Long-term gains are taxed at 0%, 15% or 20% depending on taxable income. For 2026, the 15% rate starts above $49,450 (single) or $98,900 (married filing jointly), and 20% applies above $545,500 or $613,700 (Rev. Proc. 2025-32). The 3.8% net investment income tax applies to rental profit and taxable gains if your modified AGI is over $200,000 (single) or $250,000 (married filing jointly); excluded gain on a main home isn’t subject to it (Topic 559). The calculator uses one rate you choose rather than working through the brackets.
Not modeled: 1031 exchanges, partial exclusions, moving back in, state-specific rules and passive-loss carryforwards. The methodology page lists every formula and simplification.
Worked examples: selling vs renting in three situations
These results are calculated by the same engine as the tool above, each time the site is built, so the text always matches the calculator.
Low mortgage rate, strong rent, long hold
A 3% mortgage and rent that comfortably covers the payment. Renting wins even after losing the exclusion, because most of each payment builds equity and the cheap loan stays in place.
- Home value
- $400,000
- Mortgage
- $250,000 at 3%
- Monthly rent
- $2,900
- Rent for
- 10 years
- Bought for
- $320,000 incl. improvements
- Lived there
- 5 years
Everything else uses the calculator’s example defaults: 3% appreciation, 3% rent growth, 5% vacancy, 8% management, 7% selling costs, 5% after-tax return, single filer.
Renting comes out about $171,900 ahead after 10 years ($370,605 if renting vs $198,725 if selling). Tax on a sale today: $0; after 10 years: $47,471. Break-even rent: $1,649/month. Losing the exclusion costs about $27,000.
Open this example in the calculator
Large gain, weak rent
A home that has more than doubled in value, a 6.5% mortgage, and rent that is low relative to the price. Selling now uses the $250,000 exclusion; renting for 5 years loses it and adds tax on depreciation.
- Home value
- $800,000
- Mortgage
- $120,000 at 6.5%
- Monthly rent
- $3,400
- Rent for
- 5 years
- Bought for
- $420,000 incl. improvements
- Lived there
- 9 years
Everything else uses the calculator’s example defaults: 3% appreciation, 3% rent growth, 5% vacancy, 8% management, 7% selling costs, 5% after-tax return, single filer.
Selling comes out about $71,200 ahead after 5 years ($711,037 if renting vs $782,233 if selling). Tax on a sale today: $11,100; after 5 years: $79,815. Break-even rent: $4,777/month. Losing the exclusion costs about $37,500.
Open this example in the calculator
A close call: recent 6% mortgage, 3-year rental
A newer loan at 6%, rent that doesn't quite cover costs, modest appreciation, and a sale inside the 3-year window so the exclusion survives. The two paths end up within 2% of each other.
- Home value
- $500,000
- Mortgage
- $300,000 at 6%
- Monthly rent
- $3,000
- Rent for
- 3 years
- Bought for
- $370,000 incl. improvements
- Lived there
- 4 years
Everything else uses the calculator’s example defaults: 2% appreciation, 3% rent growth, 5% vacancy, 8% management, 7% selling costs, 5% after-tax return, single filer.
Too close to call: about $1,000 apart after 3 years ($189,980 if renting vs $191,008 if selling). Tax on a sale today: $0; after 3 years: $7,104. Break-even rent: $3,030/month.
Open this example in the calculator
Sell or rent FAQ
Should I sell or rent my house?
It depends on a handful of numbers: how much rent you'd collect after costs, your mortgage rate compared with what the sale money could earn, how much you'd pay to sell, and how much tax you'd owe now versus later. Renting tends to win with a low mortgage rate and strong rent. Selling tends to win when rent barely covers costs, when you have a large gain you can still exclude from tax, or when you need the cash.
Put your own numbers into the calculator above, then check the sensitivity tables to see how much the answer depends on guesses about rent and prices.
How much rent should I charge?
Look at homes like yours that are listed for rent nearby right now: same area, similar size, bedrooms and condition. Asking rents can be higher than what homes actually rent for, so note how long listings stay up. A local property manager will usually give you a rent estimate for free. Then enter a conservative figure and use the vacancy field for the weeks between tenants.
Is it better to keep a house with a low mortgage rate and rent it out?
Often, yes. A low fixed rate means more of the rent goes to equity instead of interest, and the cheap loan stays in place while the home's full value rises or falls. That leverage cuts both ways: if prices fall, you carry the loss on the whole house. A low rate also doesn't help if rent can't cover the payment plus taxes, insurance, repairs and vacancy, and renting for more than 3 years after moving out can cost you the tax exclusion on the gain.
How long can I rent out my home before I lose the capital gains exclusion?
Generally up to 3 years. To exclude up to $250,000 of gain ($500,000 if married filing jointly), you must have owned the home and lived in it as your main home for at least 2 of the 5 years before the sale. If you lived there until you moved out, those 2 years stay inside the 5-year window for 3 years. Close the sale after that and the exclusion is gone entirely, not reduced. The test counts days, so leave a margin. Source: IRS Publication 523.
Do I owe tax on the depreciation when I sell a rental?
Yes. Depreciation lowers your tax each year you rent, but it also lowers your cost basis. When you sell, the gain equal to the depreciation you took, or were entitled to take, is taxed at your ordinary rate up to a maximum of 25%. The main-home exclusion never covers it, even if you sell within 3 years. Sources: IRS Publication 523 and Topic 409.
Can I move back in to avoid capital gains tax?
Moving back in and living there for 2 more years can restore eligibility, but it may not restore the full exclusion. For time after 2008, rental periods that come before your last stretch of living there count as nonqualified use, and the share of the gain for those periods can't be excluded. Depreciation is taxed either way. Rental time after you finally move out doesn't count against you this way. Source: IRS Publication 523, Business or Rental Use of Home.
What costs do landlords forget?
Vacancy between tenants, cleaning and repairs at turnover, a landlord insurance policy (usually pricier than homeowner cover), larger repairs like roofs and water heaters, and the tax on rental profit. Utilities you still pay, HOA fees, local rental registration or inspection fees, and your own time also add up. The advanced section of the calculator has a field for each.
Do I need a property manager?
No, but price one in if you live far away, don't want calls about repairs, or haven't handled tenant screening, leases and deposits before. Managers commonly charge a percentage of collected rent plus leasing fees. If you plan to manage it yourself, set the management fee to 0% and count the hours you'll spend.
Can I rent my primary residence without telling my lender?
Check your mortgage documents first. The standard Fannie Mae and Freddie Mac security instrument requires you to move in within 60 days of closing and live there for at least one year, unless the lender agrees otherwise. Many loans don't restrict renting after that, but terms vary. You also need to tell your insurer, because a homeowner policy may not cover a tenant-occupied home, and check any HOA rental rules.
Is rental income taxed?
Yes, as ordinary income. You can deduct operating expenses, mortgage interest, property tax and depreciation, but not principal payments. If deductions exceed rent, passive-loss rules limit how much of the loss you can use against other income; there is a special allowance of up to $25,000 that phases out as income rises from $100,000 to $150,000. Sources: IRS Publications 527 and 925.
Disclaimer
This calculator is a decision aid, not tax, legal or financial advice. It estimates federal tax using simplified rules and the assumptions you enter, and real results will differ. Talk to a CPA or enrolled agent before you act, especially about when to close a sale. Landlord-tenant questions belong with a local attorney, and loan terms with your lender.
Last reviewed: October 2026. Tax rules checked against IRS Publications 523, 527 and 925, Topics 409, 559 and 701, and Rev. Proc. 2025-32 (2026 inflation adjustments).