Should I sell or rent out my present home?
If you are moving and trying to decide whether to rent out or sell your present home, consider two important factors:
How your choice will affect your cash position
How willing and able you are to manage a rental property
Are you buying another home? If so, you may need the proceeds from the sale of your present home to fund the purchase of your new one. If you anticipate that the sale might result in a loss, consider whether it would be better to rent out your present home, at least until the real estate market turns around. You may need to accept the loss to currently realize the cash that a sale now would bring. If the sale results in a capital gain, consider whether you will be able to exclude that gain from federal income taxation. (If you meet all of the requirements, you may exclude up to $250,000; up to $500,000 if you're married and file a joint return.) If you aren't able to exclude all or part of the capital gain, you may need to reserve a portion of the proceeds from the sale to cover the taxes due. Or you may need to defer the sale and rent out your home in the interim.