TL;DR — the short version
The tax clock matters most. If you owned and lived in the home for 2 of the 5 years before a sale, you can exclude up to $250,000 of gain ($500,000 married filing jointly). Renting it out for a while after you move doesn’t automatically cost you that.
Traded before 2 years? You may still get a partial exclusion. The IRS allows a reduced exclusion when a new job is at least 50 miles farther from the home than your old one.
Rental depreciation can’t be excluded. Depreciation you claim (or could have claimed) while renting is taxed when you sell, even if the rest of the gain is tax-free.
Check your mortgage before you list it for rent. Primary-residence loans usually expect you to live in the home for at least a year, with exceptions for circumstances beyond your control. Call your lender first.
Being a landlord from another city takes a plan: a property manager, the right insurance, city rental licenses and Kansas or Missouri deposit rules.
Trades, transfers and contract changes can move an athlete across the country in a matter of days. If you own a home in Lenexa, Overland Park, Shawnee or Kansas City, one of the first questions is what to do with it: sell it now, or keep it and rent it out?
There’s no single right answer, but there is a right order to think it through: taxes first, then your loan, then whether you really want to be a long-distance landlord. If you haven’t bought yet and a move is possible, start with The Pro Athlete’s Guide to Buying a Home in KC.
1. Rent vs. Sell at a Glance
Sell | Rent it out | |
|---|---|---|
Cash | Equity in hand now | Equity stays in the home |
Taxes | Gain may be excluded if you qualify | Rental income is taxable; depreciation is recaptured later |
Work | One transaction | Tenants, repairs, licensing, a manager |
Risk | Market timing on the sale | Vacancy, damage, rent not covering the payment |
Flexibility | Clean break | Keeps a home base if you might come back |
2. The Tax Clock: The 2-of-5-Year Rule
Under federal tax law, you can exclude up to $250,000 of gain on the sale of your main home ($500,000 for most married couples filing jointly) if you owned it and lived in it for at least 24 months during the 5 years before the sale. According to IRS Publication 523, those 24 months don’t have to be in a row.
Renting after you move out
Time the home is rented after the last date you lived in it, within that 5-year window, isn’t treated as “nonqualified use” under the IRS rules. In plain terms: if you lived there for 2 years and then rented it out, you can generally sell within about 3 years of moving out and still qualify. Wait longer, and you fall outside the window.
Traded before you hit 2 years
A work-related move can qualify you for a partial exclusion. IRS Publication 523 describes it as taking or being transferred to a new job at least 50 miles farther from the home than your old work location. The exclusion is reduced based on how long you actually owned and lived there.
Depreciation doesn’t get excluded
While a home is a rental, you deduct depreciation each year. When you sell, Publication 523 says you can’t exclude the part of your gain equal to depreciation for periods after May 6, 1997. That portion is taxable even if the rest of the gain is excluded.
What to do: Before you sign a lease, ask your CPA to map your move-out date, your 5-year deadline and the tax on a sale now versus later. Athletes often file in several states, so this is worth a professional look. For the Kansas side of a sale, see Capital Gains, Property Taxes and Downsizing in Kansas.
3. Your Mortgage and Insurance
Occupancy rules
If you bought with a primary-residence loan, you likely certified that you’d live in the home. Fannie Mae’s owner-occupant certification, for example, expects you to move in within 60 days of closing and live there for at least one year, with exceptions for extenuating circumstances beyond your control. A trade may fit that description, but don’t assume. Talk to your lender before you rent the home out.
Insurance
Once tenants move in, you’ll generally need a landlord policy instead of a homeowners policy, and your tenant should carry renters insurance.
What to do: Call your lender and your insurance agent before the home goes on the rental market, and keep notes on what they tell you.
4. Being a Long-Distance Landlord in Kansas or Missouri
Security deposits
Kansas | Missouri | |
|---|---|---|
Unfurnished home | Up to 1 month’s rent | Up to 2 months’ rent |
Furnished home | Up to 1.5 months’ rent | Up to 2 months’ rent |
Pets | Extra deposit up to half a month’s rent | Check your lease and an attorney |
Kansas limits come from K.S.A. 58-2550, and Missouri’s from RSMo 535.300.
City rental licenses
Some cities require a license or permit before tenants move in:
Lenexa: a rental license is required before tenants live in the home. Fees start at $75 per property, it renews every January, and the city inspects rental exteriors every other year.
Kansas City, Missouri: rental owners must register for a Healthy Homes rental permit.
Overland Park, Shawnee and other cities: rules differ, and short-term rentals have their own requirements. Check with the city before you list.
A property manager
From another city, you can’t handle showings or a 2 a.m. water leak. A local property manager handles screening, rent and maintenance for a fee. Compare two or three proposals.
What to do: Line up a manager and the city license before you set a move-in date for a tenant.
Weighing whether to sell or rent your KC home?
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5. Run the Numbers Honestly
Renting only works if the rent covers more than the mortgage. Build a simple monthly budget:
Mortgage principal and interest, property taxes and insurance
HOA dues, if any
Property management fees
A repair and maintenance reserve
A vacancy cushion for the months between tenants
Compare that to realistic rent for similar homes nearby. If the numbers only work in a perfect year, selling may be the better choice. For how athletes think about real estate as an investment, read Athletes: Buy, Rent, or Invest Revenue-Share Money?
What to do: Get a sale estimate and a rent estimate for your home in the same week so you’re comparing real numbers.
Frequently Asked Questions
Can I rent out my house and still avoid capital gains tax when I sell?
Often, yes. If you owned and lived in the home for at least 2 of the 5 years before the sale, you can generally exclude up to $250,000 of gain ($500,000 married filing jointly), even if it was rented after you moved out. Depreciation from the rental years is still taxable.
What if I get traded before I’ve lived in my home for 2 years?
You may qualify for a reduced exclusion. The IRS allows one for a work-related move when the new job is at least 50 miles farther from the home than your old one. A CPA can calculate your amount.
Can I rent out my home if I have a primary-residence mortgage?
Check with your lender first. Primary-residence loans usually expect you to live in the home for at least a year, with exceptions for circumstances beyond your control, such as some job relocations.
How much can a landlord charge for a security deposit in Kansas?
Up to one month’s rent for an unfurnished home and up to one and a half months’ rent for a furnished home, plus up to half a month’s rent for a pet deposit, under K.S.A. 58-2550. In Missouri, the limit is two months’ rent.
Do I need a rental license to rent out my house in Johnson County?
It depends on the city. Lenexa requires one before tenants move in, and Kansas City, Missouri requires a rental permit.
Related Resources
The Athlete’s Guide to Buying Real Estate in KC — free guide
This article is general information, not tax, legal or financial advice. Tax and lending rules depend on your situation, so confirm your plan with a CPA, your lender and, if needed, a Kansas or Missouri attorney.
Free guide
The Athlete’s Guide to Buying Real Estate in KC
How lenders view revenue-share and NIL income, four paths to buying, and when to rent, buy or invest.