If you have lived in your Houston home for at least two years when you move out, you can generally rent it out and still sell with the federal exclusion of up to $250,000 of gain, or $500,000 for a married couple filing jointly, as long as the sale closes within three years of the move-out date. The part of the gain equal to the rental years’ depreciation is taxed either way. Keeping the home as a long-term rental is what changes the math: past that window the exclusion is gone, and the Texas homestead exemption and its 10 percent appraisal cap have ended too.
This guide is written by Energy Realty, a west Houston brokerage with offices in the Energy Corridor and in Katy. Our agents list homes for owners who are leaving, lease them for owners who are keeping them and, through Energy Realty Management, manage them for owners on assignment elsewhere. Tax questions belong with a CPA, legal ones with a Texas real estate attorney.
Sell, rent and sell later, or keep it: what each path triggers
| What it affects | Sell now | Rent now, sell within the window | Keep as a long-term rental |
|---|---|---|---|
| Federal tax on the gain | Exclusion of up to $250,000, or $500,000 filing jointly, if you meet the two-of-five-year tests; a partial exclusion if you fall short and moved for work | The same exclusion while 24 months of residence fall inside the five years before closing; gain equal to depreciation is taxed | Exclusion lost once the window passes, unless you move back in and requalify |
| Rental income | None | Reported on Schedule E; the house is depreciated over 27.5 years | The same, for as long as you rent |
| Texas homestead | Ends with the sale | Can continue through an absence of less than two years if you intend to return and establish no other principal residence | Ends, and with it the 10 percent cap and the $140,000 school district exemption |
| Mortgage | Paid off at closing | Read the occupancy covenant and ask your servicer | The same |
| Landlord duties | None | Property Code Chapter 92 from the first lease | Chapter 92 at every lease and turnover |
| Insurance | Watch the vacancy limit while listed | Landlord coverage | Landlord coverage |
| FIRPTA withholding | Only if the seller is a foreign person | At the sale, only for a foreign person | The same; a nonresident alien owes 30 percent, or a lower treaty rate, on rent unless they elect net taxation |
Sources: IRS Publications 523, 527 and 519 (2025); Internal Revenue Code Section 121; Texas Tax Code Sections 11.13 and 23.23; Texas Property Code Chapter 92; Form 3044; Texas Department of Insurance; IRS FIRPTA pages. Retrieved October 12, 2026.
Four clocks that start the day you move out
| Clock | What it measures | How long you have | Source |
|---|---|---|---|
| Federal home sale exclusion | 24 months of ownership and of residence within the five years ending on the closing date | Up to three years after move-out, if you lived there at least two years before leaving | IRS Publication 523; IRC Section 121(a) |
| Texas homestead | A temporary absence | Less than two years, with an intent to return and no other principal residence | Tax Code Section 11.13(l) |
| Mortgage occupancy | Occupancy as your principal residence | At least one year after occupancy, on the standard Texas form | Form 3044, Section 6 |
| Insurance vacancy | How long the house sits empty | TDI says most companies stop coverage after 60 days vacant | TDI Home insurance guide |
A fifth date sits on the state’s calendar. Tax Code Section 23.231 limits annual appraisal increases on non-homestead real property below a value ceiling to 20 percent, but the section expires December 31, 2026. A long-term landlord should not plan around it unless the Legislature extends it.
Sources: IRS Publication 523 (2025), Eligibility Steps 2 and 3; Texas Tax Code Section 11.13(l); Texas Tax Code Section 23.231(b), (d), (j) and (k); Form 3044 07/2021 (rev. 01/24), Section 6; Texas Department of Insurance, Home insurance guide. Retrieved October 12, 2026.
Path 1: Sell before you go, or soon after
The exclusion and the two-of-five-year tests
IRS Publication 523 lets you exclude up to $250,000 of gain on the sale of your main home, or $500,000 for a married couple filing jointly, if you owned the home for at least 24 months of the five years before closing and lived in it for at least 24 months of those five years. The residence need not be continuous; the IRS counts 730 days in total. On a joint return one spouse can meet the ownership test, but each spouse must meet the residence test for the full $500,000, and the exclusion can be used only once in any two-year period. For what buyers check, see our guide to selling a home in the Energy Corridor, Memorial or Katy.
Under two years? The work-related partial exclusion
If you took or were transferred to a new job at least 50 miles farther from the home than your old work location, Publication 523 allows a reduced exclusion. Take the shortest of your residence time in the five years before the sale, your ownership time and the time since your last excluded sale, divide it by 24 months and multiply by $250,000. A single owner with 12 months of qualifying time has a limit of $125,000; a married couple filing jointly figures each spouse and adds the results. The separate 10-year suspension of the five-year test covers only uniformed services, Foreign Service, intelligence and Peace Corps personnel, not private-sector transfers.
If your employer offers to buy the house
A relocation package may include a home sale program, under names that vary; the IRS described the common structures in Revenue Ruling 2005-74. In one, the employer’s relocation management company offers to buy the home at a fair market value set by averaging two appraisals. In an amended value option, the employee lists the home, and when a buyer makes a bona fide higher offer, the relocation company amends its contract to match and resells the home itself; the employee signs nothing with the outside buyer, and the listing carries an exclusion clause so no commission is owed if the relocation company buys. The IRS treated both as two sales, so the employee’s gain is home sale gain, not compensation. Where the higher price depended on the outside buyer’s contract and the employee kept approval over the negotiations, it found one sale, and employer-paid costs became taxable compensation. Ask your relocation counselor which structure applies before you sign a listing.
FIRPTA, for foreign nationals going home
FIRPTA withholding applies only when the seller is a foreign person: a nonresident alien individual or a foreign corporation, partnership, trust or estate. A U.S. citizen is not an alien wherever they live and can give the buyer a certification of non-foreign status. A foreign national who is a nonresident alien at the sale is subject to it: the buyer generally withholds 15 percent of the amount realized, 10 percent if the buyer will live in the home and the price is over $300,000 but not over $1 million, and nothing if the price is $300,000 or less and the buyer will live in the home. The IRS says a nonresident alien who meets the eligibility test can still claim the exclusion, up to $250,000, and can request a withholding certificate when withholding could exceed the tax.
Sources: IRS Publication 523 (2025), Eligibility Test, Work-Related Move and Worksheet 1; Internal Revenue Code Section 121; IRS Publication 519 (2025), Tax withheld on real property sales; IRS Revenue Ruling 2005-74, Internal Revenue Bulletin 2005-51; IRS, FIRPTA Withholding, Definitions and Exceptions pages. Retrieved October 12, 2026.
Path 2: Rent it now and sell within the window
Why renting after you move out is treated differently
For periods after 2008, the tax code denies the exclusion for gain allocated to nonqualified use, meaning time the home was not your or your spouse’s principal residence. That does not reach a rental that comes after your last day in the house: Section 121(b)(5)(C)(ii)(I) excludes “any portion of the 5-year period described in subsection (a) which is after the last date that such property is used as the principal residence of the taxpayer or the taxpayer’s spouse.” In Publication 523’s example, an owner who lived in the house for three years, moved out, rented it for nearly two years and sold could exclude the gain other than depreciation. In the opposite example, an owner who rented the property out for two years before ever living there, then lived there for two, then moved out and sold a year later had 40 percent of the remaining gain allocated to nonqualified use and taxed. If an assignment could bring you back to the same house, note the exception for a temporary absence of up to two years in total due to a change of employment, which the code does not count as nonqualified use.
Depreciation and the rent
Publication 523 says you cannot exclude gain equal to any depreciation allowed or allowable for periods after May 6, 1997, and its example covers depreciation the owner “claimed or could have claimed,” so skipping the deduction does not avoid the tax. The IRS taxes that unrecaptured section 1250 gain at a maximum rate of 25 percent. Publication 527 says that in most cases you must include all rent in gross income, reported on Schedule E. The depreciation basis is the lesser of fair market value or your adjusted basis on the conversion date (land is not depreciable), and the house is depreciated over 27.5 years. If you will become a nonresident or file in two countries, have a CPA set this up before the first rent payment.
The homestead and the mortgage
Tax Code Section 11.13(l) keeps a home’s homestead character during a temporary absence if the owner does not establish a different principal residence and the absence is for less than two years with an intent to return. Renting is not a listed condition, but the Comptroller notes that chief appraisers are solely responsible for deciding who qualifies, so tell the appraisal district what you are doing. If you will not be back within two years, or you establish a principal residence elsewhere, the exemption ends, and Section 11.43(g) requires written notice to the appraisal office before May 1 after your entitlement ends; under Section 11.43(i), an exemption allowed in error can be added back for any of the five preceding years. That office is the Harris Central Appraisal District in Harris County, the Fort Bend Central Appraisal District in Fort Bend County and the Waller County Appraisal District for homes in the Waller County part of the Katy area.
The standard Fannie Mae and Freddie Mac Texas deed of trust, Form 3044, says in Section 6 that the borrower must occupy the property as a principal residence “within 60 days after the execution of this Security Instrument” and continue “for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent will not be unreasonably withheld, or unless extenuating circumstances exist that are beyond Borrower’s control.” Section 5 requires the insurance the lender requires. Your loan may use a different instrument; read your own deed of trust and ask your servicer before you sign a lease.
Sources: Internal Revenue Code Sections 121(b)(5) and 121(d)(6); IRS Publication 523 (2025), Business or Rental Use of Home, Worksheet 3 and Recapturing Depreciation; IRS Topic No. 409; IRS Publication 527 (2025); Texas Tax Code Sections 11.13(l), 11.43(g) and 11.43(i); Texas Comptroller of Public Accounts, Property Tax Exemptions; Form 3044 07/2021 (rev. 01/24), Sections 5 and 6. Retrieved October 12, 2026.
Path 3: Keep it as a long-term rental
Keeping the house long term changes three things.
- The exclusion runs out. Once your 24 months of residence fall outside the five years before a sale, the gain is taxable. Moving back in for two more years can requalify you, but rental years before your return can then count as nonqualified use; the code excepts only a temporary absence of up to two years in total due to a change of employment, so have a CPA run the allocation.
- The property tax base resets. The $140,000 school district exemption no longer applies, and the 10 percent cap under Tax Code Section 23.23 expires on January 1 of the first tax year that neither you nor your spouse qualifies. In the Comptroller’s illustration, a homestead owner of a home appraised at $300,000 pays school taxes as if it were worth $160,000. Our MUD and property tax guide shows how the rest of a west Houston bill is built.
- Nonresident owners are taxed differently. IRS Publication 519 says a nonresident alien’s U.S. rental income is taxed at 30 percent, or a lower treaty rate, unless the owner chooses to treat it as effectively connected with a U.S. trade or business, which allows deductions so only net income is taxed.
Sources: Internal Revenue Code Section 121(b)(5)(C)(ii); Texas Tax Code Sections 11.13(b) and 23.23(c); Texas Comptroller, Property Tax Exemptions; IRS Publication 519 (2025). Retrieved October 12, 2026.
Becoming a Texas landlord from somewhere else
You need no license to lease your own house: the real estate license law does not apply to an owner leasing the owner’s own real estate. It can apply to anyone you pay to lease or manage it. A person who, for compensation, controls the acceptance or deposit of rent from a resident of a single-family home is a broker under Occupations Code Section 1101.002 and must be licensed under Section 1101.351. Chapter 92 of the Property Code puts these duties on the landlord.
| Duty | What the law requires | Property Code section |
|---|---|---|
| Flood disclosure | A signed notice, at or before signing the lease, stating whether you are aware the home is in a 100-year floodplain (if neither box is checked, the tenant should assume it is) and whether you know it flooded at least once in the five years before the lease. In effect since January 1, 2022. | 92.0135 |
| Security deposit | Refund on or before the 30th day after the tenant surrenders the home, with an itemized list of deductions; nothing kept for normal wear and tear; due once the tenant gives a written forwarding address. | 92.103, 92.104, 92.107 |
| Repairs | A diligent effort to repair a condition that, in the statute’s words, “materially affects the physical health or safety of an ordinary tenant,” after notice from a tenant who is current on rent, including hot water of at least 120 degrees Fahrenheit. | 92.052 |
| Security devices | With limited exceptions, window latches, a keyed dead bolt or doorknob lock, a keyless bolting device and a door viewer on exterior doors, and sliding door pin locks and handle latches or bars, at the landlord’s expense; rekeying within seven days after each turnover. | 92.153, 92.156 |
| Smoke alarms | At least one in each bedroom, in a corridor serving several bedrooms and on each level, tested at the start of each tenancy. | 92.255, 92.258 |
| Ownership and management | The record owner’s name and address and, if an off-site company manages the home, its name and street address, in the lease or within seven days of a tenant’s request. | 92.201 |
| Emergency number | A telephone number tenants can use to report emergencies about the home’s condition. | 92.020 |
If you violate the flood notice rule and a tenant suffers a substantial loss to personal property in a flood, the tenant may terminate the lease, so look the parcel up on the FEMA flood map first; our flood guide explains how. The federal Fair Housing Act covers renting a home, and any manager or agent you hire must follow it in screening tenants. When a lease dispute starts, call a Texas real estate attorney.
Sources: Texas Property Code Chapter 92 (Section 92.0135 added by HB 531, effective January 1, 2022, and amended by SB 2349, effective September 1, 2025); Texas Occupations Code Sections 1101.002, 1101.005 and 1101.351; U.S. Department of Housing and Urban Development, Fair Housing Act overview. Retrieved October 12, 2026.
Insurance: a homeowners policy alone may not cover a rental
The Texas Department of Insurance says most homeowners insurance won’t cover damage to a rental property, or might limit what it pays, and describes landlord insurance as mainly for traditional, long-term leases; it suggests asking your agent or insurer whether to add landlord coverage to your homeowner policy or buy a separate one. Your tenant’s renters policy will not fill the gap; TDI notes that renters insurance won’t pay to fix the house, because the building owner’s policy does that. Tell your insurer the date the house becomes a rental and keep the coverage your deed of trust requires. Our guide to homeowners insurance in west Houston covers wind, hail and flood.
Sources: Texas Department of Insurance, Renting out your home? Check your insurance and Home insurance guide; Form 3044, Section 5. Retrieved October 12, 2026.
Managing a Houston rental from another city or country
Under Section 92.052, the repair duty starts with the tenant’s notice to the person to whom, or the place where, rent is normally paid, so whoever collects the rent needs a way to act on it. Energy Realty Management is our property management arm, and the brokerage says many of the owners its property manager works with relocated for work assignments. Its published service description lists a 24-hour owner portal, monthly itemized statements, rent less expenses deposited directly on the fifth of each month, annual inspections with reports and photos, lease renewal outreach 30 to 60 days ahead and 1099 record keeping. The brokerage describes security deposits as held in a separate escrow account per Texas law, with itemized move-out reports. Terms and fees are in the management agreement.
Sources: Energy Realty, Property Management page and property manager profile; Texas Property Code Section 92.052(a). Retrieved October 12, 2026.
The 90 days before the move
- Days 90 to 61: gather the dates. Pull your closing statement and deed of trust, note when you bought, moved in and will move out, and ask your employer for the written relocation policy. Book a CPA to confirm your exclusion window.
- Days 60 to 31: decide. Get a sale price opinion and a rent opinion for the house. If you sell through a relocation program, follow its listing rules. If you rent, call your insurer and servicer, choose a licensed manager and look up the flood zone.
- Days 30 to 1: prepare the house. For a rental, test the smoke alarms, confirm the required locks, rekey, photograph each room and prepare the flood notice and ownership disclosure. For a vacant listing, tell your insurer the move-out date.
- After you leave: set the calendar. Three years from move-out (the exclusion window, if you lived there two years first), two years from move-out (the homestead limit), the May 1 appraisal district notice deadline, and December 31, 2026.
Frequently Asked Questions
Should I sell or rent my house when I relocate for work?
It depends on how long you lived there and whether you will return. If you lived in the home at least two years, renting and then selling within three years of moving out keeps the federal exclusion of up to $250,000 of gain, or $500,000 filing jointly, apart from depreciation. Keeping it longer gives up that exclusion in exchange for rental income, and the Texas homestead ends once you have been away two years or set up a principal residence elsewhere.
How long can I rent out my home before selling and still avoid capital gains tax?
If you lived there at least two years before moving out, generally up to three years from the move-out date, because 24 months of residence must fall inside the five years ending on the closing date. Rental time after your last day in the house is not nonqualified use. Gain equal to depreciation allowed or allowable after May 6, 1997 is taxed regardless.
What if I am transferred before I have owned the home for two years?
You may qualify for a partial exclusion if your new job is at least 50 miles farther from the home than your old work location. IRS Publication 523 divides the shortest of your residence time, ownership time and time since your last excluded sale by 24 months and applies that fraction to $250,000. Twelve qualifying months gives a single owner a $125,000 limit.
Do I lose my Texas homestead exemption if I rent out my house?
Not automatically. Tax Code Section 11.13(l) keeps it during an absence of less than two years if you intend to return and establish no other principal residence, and the chief appraiser decides. If you will be gone two years or more, or you establish a principal residence elsewhere, it ends: notify the appraisal district in writing before May 1 after it ends, and expect the 10 percent appraisal cap to expire too.
Does my mortgage let me rent out the house?
Read your deed of trust. The standard Texas form, Form 3044, requires you to occupy the home as your principal residence within 60 days after signing and for at least one year after occupancy, unless the lender agrees in writing or extenuating circumstances beyond your control exist. Your loan may use a different instrument, so ask your servicer before you sign a lease.
What does Texas require of a landlord?
Property Code Chapter 92 requires a signed flood disclosure at or before signing, a deposit refund within 30 days after the tenant leaves with itemized deductions, diligent repair, after notice, of the conditions listed in Section 92.052, required locks and rekeying within seven days of each turnover, smoke alarms in each bedroom and on each level, and disclosure of the owner and any off-site manager.
Do I need different insurance to rent out my house?
In most cases you need more than your homeowners policy. The Texas Department of Insurance says most homeowners insurance won’t cover damage to a rental property or may limit what it pays, and suggests asking whether to add landlord coverage to your policy or buy a separate one. A tenant’s renters policy will not pay to repair the house. Tell your insurer the date the home becomes a rental, and keep the coverage your lender requires.
Does FIRPTA apply to a U.S. citizen working abroad?
No. FIRPTA withholding applies when the seller is a foreign person, which the IRS defines as a nonresident alien individual or a foreign entity. A U.S. citizen is not an alien wherever they live and can give the buyer a certification of non-foreign status. A foreign national who has become a nonresident alien is subject to it, generally at 15 percent of the amount realized, or 10 percent when the buyer will live in the home and the price is over $300,000 but not over $1 million.
What is a relocation home sale program, and does it change my taxes?
It is a program, run for the employer by a relocation management company, that buys the transferee’s home or helps sell it. IRS Revenue Ruling 2005-74 treats an appraisal-based purchase and an amended value option as two sales, so the employee’s gain is home sale gain, not pay. Where the higher price depended on the outside buyer’s contract, it found one sale, and employer-paid costs became taxable compensation.
Can Energy Realty manage my Houston home while I am on assignment?
Yes. Energy Realty Management is the brokerage’s property management arm, and the brokerage says many of the owners its property manager works with relocated for work assignments. Its published service includes an owner portal, monthly itemized statements, rent less expenses deposited on the fifth of each month, annual inspections and deposits held in a separate escrow account. Terms are set by the management agreement.
Keep reading
- Relocating to Houston for an energy job: the corporate and international relocation guide
- MUD districts and Houston property taxes explained
- Buying a home in a Houston flood zone
- Living in the Energy Corridor, Houston: the complete guide
- Living in Katy, Texas: the complete guide
- Memorial, Houston real estate guide
Weighing sell against rent before a transfer?
Send us the address, your move date and the expected length of the assignment. We will prepare a written sale price opinion and a rent opinion for the address and, if you keep the house, show you how Energy Realty Management would run it. The tax and homestead questions on this page belong with your CPA. Our offices are in the Energy Corridor at 1111 Eldridge Parkway and in Katy at 23033 Grand Circle Boulevard.
Ask for a sale and rent opinion
Social Cookies
Social Cookies are used to enable you to share pages and content you find interesting throughout the website through third-party social networking or other websites (including, potentially for advertising purposes related to social networking).