Should You Sell Your Rentals Before or After Retirement?

Tax Breakdown for 55–75 Year Old Landlords in WA & ID

👴💼 Thinking of selling your rentals as you head into retirement? You’re not alone. Thousands of small landlords across Washington and Idaho are wondering if they should sell now or wait until after they’ve stopped working.

The truth is, timing matters—especially when it comes to capital gains tax, depreciation recapture, and income thresholds.

Let’s break it down.

What Happens Tax-Wise If You Sell Before Retirement?

If you’re still working and earning income, selling your rentals before retirement can increase your tax burden.

Here’s why:

Capital Gains Are Added to Your Taxable Income
If you earn $80K from a W-2 and sell a rental for a $100K gain, the IRS sees $180K in total income. That bumps you into a higher bracket.
🔗 IRS: Capital Gains Explained
Depreciation Recapture Is Taxed as Ordinary Income
Recapture is taxed up to 25%. If you’ve depreciated $80K over the years, that’s $20K in tax liability—just from the recapture alone.
You May Lose Out on Some Deductions or Credits
Higher income = fewer deductions. Selling early might disqualify you from certain retirement or healthcare-related credits.

💡 Bottom Line: Selling while still working can stack your income and increase taxes.

What If You Wait and Sell After Retirement?

For many landlords, waiting to sell until after they’ve retired can significantly reduce their tax hit.

Here’s the upside:

Lower Tax Bracket = Lower Capital Gains Tax
In 2025, if your taxable income is under $47,025 (single) or $94,050 (married), you might qualify for 0% federal capital gains.
Less Stacked Income = Less Depreciation Recapture Tax
With lower overall income, you’re less likely to be pushed into a higher tax bracket.
More Control with Seller Financing or Installment Sales
If you’re not in a rush, you can sell with seller financing and spread the gain over years, reducing your annual tax hit.

💡 Bottom Line: Waiting until after retirement often gives you more flexibility and smaller tax bites.

But What About Medicare & Social Security Impacts?

Many landlords forget that selling rentals can also affect:

Medicare Premiums (IRMAA)
A big capital gain can increase your Medicare premiums two years later.
🔗 See the IRMAA Surcharge Charts
Social Security Taxation
Your Social Security benefits can be taxed if your income exceeds certain levels.
🔗 Social Security: Tax Rules for Retirement Income

💡 Tip: Strategic timing (and even partial sales) can help avoid these cliffs.

What Are Creative Ways to Sell Without Triggering Big Taxes?

If you want out of landlording without the IRS taking a huge bite, here are a few creative exit strategies:

🏡 Seller Financing (Installment Sale)

Sell to a buyer who pays monthly—just like a mortgage. You spread out your gain over time, lowering yearly tax liability.
📘 Related: Can I Sell a Rental With Tenants Still Living There?

🔁 1031 Exchange

Swap into a different property to defer taxes completely. But be cautious—it only works if you stay a landlord.

🧾 Deferred Sales Trust (DST)

A legal structure that allows you to sell without immediate tax consequences by placing the property in a trust.

❤️ Gifting to Heirs with Step-Up in Basis

Holding property until death can allow your heirs to receive it tax-free with a step-up in basis.

So… Should You Sell Before or After You Retire?

There’s no one-size-fits-all. But here’s a quick cheat sheet to help you decide:

Scenario	Selling Before Retirement	Selling After Retirement
Still working full-time	❌ Higher taxes likely	✅ Lower income = lower taxes
Need lump sum now	✅ Access cash	❌ Bigger tax hit if working
Interested in monthly income	🤔 Consider seller-financing	✅ Even better post-retirement
Concerned about health/Social Security	❌ May spike Medicare/SS taxes	✅ Easier to control timing

✅ Best Practice: Talk to a CPA who understands real estate. And if you’re ready to exit without taking a tax hammer, we can help you run the numbers.

What Easy Landlord Exit Offers for Retiring Landlords

At Easy Landlord Exit, we specialize in working with 55–75 year old landlords across Eastern Washington and North Idaho who want to:

Avoid capital gains shocks
Sell with creative financing, not just cash offers
Ditch property management headaches
Preserve monthly income and protect retirement
Exit quietly—even with long-term tenants still living there

Ready to Run the Numbers On Your Exit?

We’ll help you explore:

Capital gains and depreciation tax projections
Seller financing vs. lump-sum exit
Whether waiting until after retirement makes sense
How to structure deals that protect your income and equity

🎯 Download the Landlord Exit Toolkit (WA/ID Edition) — or Contact Us for a Free Exit Review

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