Should I Sell or Rent Out My NYC Apartment?

Verified Federal Tax Rule

IRS Publication 523 explains that the main-home exclusion generally requires ownership and use of the home as a main residence for at least 24 months during the five-year period ending on the sale date. A qualifying taxpayer may exclude up to $250,000 of gain, or up to $500,000 on a qualifying joint return.

The old claim that renting for more than three consecutive years automatically destroys the exclusion was wrong. Eligibility depends on the actual sale date and the ownership, residence, look-back, prior-exclusion, nonqualified-use, and other rules. Depreciation allowed or allowable for rental use after May 6, 1997 is not excludable under section 121.

Have a tax adviser model the proposed rental start date, expected sale window, depreciation, nonqualified use, and state and city consequences before deciding.

Building and Operating Review

Read the proprietary lease, condominium documents, house rules, insurance requirements, mortgage terms, and current board or management policy. A sublet term, fee, approval, or cap is building-specific; do not use a Manhattan-wide percentage or "two years out of five" assumption.

Build both choices from current property data. For a sale, use a written net sheet and tax estimate. For a rental, use documented permitted rent, vacancy assumption, management plan, maintenance or common charges, taxes, insurance, leasing costs, repairs, compliance work, and building charges. Stress-test nonpayment, vacancy, and major repair rather than treating gross rent as return.

Decision Rule

Compare after-tax sale proceeds and their alternative use with the risk-adjusted rental cash flow, future sale costs, tax effects, building restrictions, and the owner's willingness to operate housing. The result is property- and owner-specific.

Sources

• Internal Revenue Service, Publication 523: Selling Your Home, fetched and read 2026-08-07.