You are moving, but you are not sure you want to let go of your current home. Maybe you have a low mortgage rate, or you like the idea of rental income. Should you sell it or rent it out?
There is no one right answer. But a few questions, and a couple of tax rules, can make the decision much clearer.
Quick answer: Renting out your home can bring in income, but it also means landlord costs, risks, and paperwork. If you sell, you may be able to exclude up to $250,000 of gain from federal income tax, or $500,000 for married couples filing jointly, if you owned and lived in the home for at least two of the five years before the sale. Renting too long can cost you that exclusion.
Question 1: Would the Rent Cover Your Costs?
Start with the numbers. In August 2026, the average lease price for a single-family home in the Houston area was $2,412, nearly flat from a year earlier, and homes took an average of 36 days to lease, according to the Houston Association of REALTORS® (HAR).
Now compare what you could charge for your home with your real monthly costs:
- Mortgage payment
- Property taxes
- Insurance
- HOA dues
- Repairs and maintenance
- Months the home sits empty between tenants
- Property management fees, if you hire help
If the rent barely covers your costs, a single big repair can put you in the red.
Question 2: Do You Want to Be a Landlord?
Being a landlord means screening tenants, handling repair calls, and dealing with late payments or move-outs. Some owners enjoy it. Others hire a property manager, which adds a cost. Be honest about your time and patience.
Question 3: How Does It Affect Your Taxes When You Sell?
This is the part to understand before you sign a lease.
According to the IRS, you may be able to exclude up to $250,000 of gain from the sale of your main home, or up to $500,000 if you file a joint return with your spouse. To qualify, you generally must have owned the home and lived in it as your main home for at least two of the five years before the sale. Generally, you cannot use the exclusion if you used it on another home sale within the past two years.
What that means if you rent it out: The two years do not have to be the most recent two years, so you could move out, rent the home for up to three years, and still qualify. If you rent it longer than that, you may no longer meet the two-out-of-five-year test.
Also keep in mind that if you claim depreciation while the home is a rental, the gain related to that depreciation may be taxable when you sell. Talk to a tax professional about your situation.
Question 4: What Happens to Your Texas Property Taxes?
A Texas homestead exemption can apply to only one property, and it must be your principal residence. If you move out and rent your home, you will likely no longer qualify for the exemption on it. Texas requires homeowners to notify the chief appraiser in writing before May 1 of the year after their right to the exemption ends.
Why it matters: Losing the exemption can raise your property tax bill on the rental, so include that in your numbers.
Question 5: Do You Need Your Equity for the Next Home?
If your down payment for your next home depends on the money from this one, selling may be the simpler path. If you can buy your next home without it, renting becomes more of an option.
Other Things to Check
- Your insurance. Ask your agent whether your current policy covers the home once you no longer live there.
- Your HOA rules. Some communities have rules about leasing, so review them before you list the home for rent.
- Your mortgage. Ask your lender whether your loan has any occupancy requirements.
The Bottom Line
Renting can work well if the numbers make sense and you are ready to be a landlord. Selling can be cleaner, especially if you want your equity or want to protect your home sale tax exclusion. Run the numbers both ways before you decide.
Frequently Asked Questions
Can I rent out my house and still avoid capital gains tax when I sell? Possibly. The IRS exclusion generally requires that you owned and lived in the home as your main home for at least two of the five years before the sale. Those years do not have to be the most recent, so renting for up to three years after you move out may still allow you to qualify.
How much is the home sale tax exclusion? Up to $250,000 of gain, or up to $500,000 if you file a joint return with your spouse, according to the IRS.
What is the average rent for a house in Houston? In August 2026, the average lease price for a single-family home in the Houston area was $2,412, according to HAR.
Do I lose my homestead exemption if I rent out my home? A Texas homestead exemption must be on your principal residence, so moving out generally means you no longer qualify. You must notify the chief appraiser in writing before May 1 of the year after your right to the exemption ends.
Not Sure Which Way to Go?
Ryan Adams and The Adams Group TX can help you compare what your home could sell for with what it could rent for, so you can decide with real numbers. Call us at (832) 308-7633 or visit us at 5822 Sienna Parkway, Suite 500, Missouri City, TX 77459.
This post is general information, not tax or legal advice. Talk to a tax professional about your situation.
