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Question

How does this compare with holding the home for a step-up in basis?

Answer

If passing assets to heirs is already part of your plan, holding the property until death can step up the basis and erase both the unrealized gain and the accumulated depreciation recapture. That’s a cleaner tax outcome than any version of the conversion strategy. The trade-off is liquidity and diversification, because the wealth stays tied up in one illiquid asset instead of funding your retirement income.

Related FAQs

How does converting a home to a rental compare with selling it directly?

What’s the difference between the Section 121 exclusion and a 1031 exchange?

How do I report depreciation recapture when selling a converted rental property?
Tax Planning Financial Planning Charitable Giving Retirement Planning Relocating in Retirement Impact of New Laws Tax Basics Tax Tips & Tricks OBBBA Protecting Your Legacy Year-Round Tax Planning Real Estate FAQs
Last Updated Sept. 23, 2026
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