Sell the apartment, or rent it out?
When you leave the city, keeping the apartment as a rental can look like free income, especially with a low mortgage rate. Two tax rules decide it. The primary-residence exclusion, up to $500K of tax-free gain for a couple, survives only if you sell within three years of moving out. And the depreciation you take as a landlord is taxed back when you sell. Enter the apartment and the rent to see which path leaves you ahead, year by year.
After 3 years you lose the $500,000 primary-residence exclusion, which is why longer holds often flip toward selling.
| Rent collected (after vacancy) | $125,400 |
| Charges, taxes, repairs, fees | -$47,000 |
| Mortgage interest | -$28,000 |
| Cash flow before tax | $50,400 |
| Depreciation (tax only) | -$41,491 |
| Taxable rental income | $8,909 |
| Tax on it | -$4,036 |
| Cash flow after tax | $46,364 |
| Years | Sell now | Rent, then sell | Difference |
|---|---|---|---|
| 1 | $1,518,882 | $1,532,673 | +$13,792 |
| 2 | $1,594,826 | $1,617,223 | +$22,398 |
| 3 · last year with exclusion | $1,674,567 | $1,707,070 | +$32,503 |
| 4 | $1,758,295 | $1,649,237 | −$109,058 |
| 5 | $1,846,210 | $1,750,514 | −$95,696 |
| 6 | $1,938,520 | $1,857,954 | −$80,567 |
| 7 | $2,035,447 | $1,966,545 | −$68,902 |
| 8 | $2,137,219 | $2,087,124 | −$50,095 |
| 9 | $2,244,080 | $2,214,867 | −$29,213 |
| 10 | $2,356,284 | $2,350,145 | −$6,139 |
Positive: renting then selling is ahead. Includes depreciation taxed back at the sale ($207,455 taken over 5 years, $73,958 of tax), selling costs and capital gains tax in both paths, and the mortgage repaid at the sale.
Sell now: $1,446,554 in hand after selling costs, $53,821 of tax and the mortgage payoff. Run the sale in detail with the capital gains tax calculator and the seller closing-cost calculator.
Simplified: the mortgage is treated as interest-only and repaid at the sale; rental income is taxed at today’s income; New York taxes the rent and the gain as the property’s state, with your home state crediting it. Confirm with your accountant before acting.