Retiring Rental Properties in Palm Beach County: Keep for Income, Sell or Exchange Into Something Easier?

Retiring rental properties owners in Palm Beach County face one big choice: keep the units for income, sell them, or trade them for something that takes less work. Each path changes your taxes, your cash flow and how much of your week goes to tenants and repairs. This guide walks through all three, with the Florida costs that make the math harder than it used to be. It is written for landlords in their 60s and 70s who want a plan before a roof, a vacancy or a health scare makes the call for them.

Key takeaways

• Keeping rentals in retirement can pay well, but insurance, HOA dues and repairs in South Florida can eat into that income fast.
• Selling triggers federal capital gains tax and a separate tax on past depreciation, called unrecaptured section 1250 gain, at a top rate of 25%.
• A 1031 exchange can defer that tax. You must name the new property within 45 days and close within 180 days, or by your tax return due date if that comes first.
• Heirs usually get a basis equal to fair market value at the date of death, which is why some retirees hold until the end.
• Run the numbers with a tax advisor before you list. The order of steps matters.

Why retiring with rental properties feels different in Florida

A rental that worked fine at 50 can feel like a second job at 70. Tenants still call at night. Hurricane season still comes every year. And the costs to own a home in South Florida have climbed in ways that a lease may not keep pace with.

Insurance is the first pressure point. Many owners have seen their premiums jump at renewal, and some have had to move carriers. Our guide to landlord insurance in Florida covers the policy types. Condo and HOA owners also face higher dues and special assessments as associations catch up on repairs and reserves.

So there are two questions to ask. Is this rental profitable? And do I want to keep running it?

Option 1: keep your rental properties when retiring

Holding on makes sense for many retirees. Rent can cover the bills while the home keeps its value. In Palm Beach County, the single-family median price was $650,000 in August 2026, up from $630,000 a year earlier, according to Miami Realtors. Condos and townhouses had a median of $300,000.

Still, the income only works if you can handle the work, or pay someone to. Before you decide to keep retiring rental properties in your portfolio, test each one against these questions.

• Does the rent cover the mortgage, taxes, insurance, HOA dues and a repair reserve with room to spare?
• How old are the roof, the AC and the water heater? A big repair in year one can wipe out a year of profit.
• Would you pay a property manager? If so, does the math still work after the fee?
• Can you ride out a vacancy of a few months without stress?

If a home passes all four, keeping it may be the simple answer. If it fails two or more, it may be time to look at the other options.

Hire a manager before you sell

Some owners like the income but not the calls. A property manager handles tenants, leases and repairs for a fee. That can turn a hands-on rental into something closer to passive income. However, a manager does not lower your insurance or HOA bills. So run the numbers with that fee included.

The step-up in basis for your heirs

There is another reason some retirees hold. Under IRS Publication 551, the basis of inherited property is generally its fair market value at the date of the owner's death. In plain terms, much of the gain that built up during your life may never be taxed if your heirs sell soon after. That rule can make holding the better choice for an owner who plans to pass the homes on. Then again, it only helps if keeping the rental fits your health, energy and cash needs today.

Option 2: sell your rental properties as you retire

Selling gives you cash, ends the landlord work and lets you simplify. It also brings a tax bill, and that bill has more than one part. Our guide to selling a rental in Florida covers the tenant side, such as leases and showings.

Capital gains tax on a rental sale

The IRS taxes long-term capital gains at 0%, 15% or 20%, based on your taxable income. Most retirees with a sizable gain will land in the 15% or 20% bracket. Since Florida has no state personal income tax, the federal bill is the main one.

Then there is the net investment income tax. The IRS applies it at 3.8% to some investment income, including many rents and gains on real estate, once modified adjusted gross income passes $200,000 for single filers or $250,000 for married couples filing jointly. A large sale in one year can push you over that line even if your normal income is lower.

Depreciation recapture when retiring rental properties

This is the part that surprises many owners. While you owned the rental, you likely took depreciation each year. That lowered your taxes then. When you sell, the IRS taxes the gain tied to that depreciation as unrecaptured section 1250 gain, at a maximum rate of 25%.

So a sale can carry three layers of federal tax: the capital gains rate, the recapture rate and possibly the 3.8% surtax. That is why a tax advisor should run your exact numbers before you list.

Spread the sales over several years

If you own more than one rental, you don't have to sell them all at once. Selling one per tax year can keep your income in a lower bracket and may keep you under the surtax line. For example, an owner with three condos might sell one in 2026, one in 2027 and hold the third. Your tax advisor can map out which order makes sense.

Option 3: a 1031 exchange of rental properties before you retire

A like-kind exchange under section 1031 lets you sell one investment property and buy another while you defer the gain. Many retirees use it to swap a hands-on rental for property that takes less of their time. For instance, an owner might trade an older duplex for a newer single-family rental with a manager in place.

The rules are strict, though. Per the IRS instructions for Form 8824, you must identify the replacement property in writing within 45 days after you transfer the old one. Then you must receive the new property by the earlier of 180 days or your tax return due date, with extensions.

• Since 2018, only real property held for business or investment qualifies.
• Property held mainly for sale, like a flip, does not qualify.
• Most owners use a qualified intermediary to hold the sale funds, so the money never touches their hands.
• The tax is deferred, not erased. If you later sell for cash, the old gain comes due.

Here is where the step-up rule comes back in. If you exchange and then hold the new property for life, your heirs may get a basis at fair market value on the date of death. As a result, the deferred gain may never be taxed. Ask a tax advisor how that plays out for your family.

Comparing the three paths for retiring rental properties

No single answer fits every owner. Still, a side-by-side look can help you narrow it down.

• Keep: best for owners with low debt, newer systems, steady tenants and the energy or budget for management.
• Sell: best for owners who want cash, need to simplify, or face big repairs they would rather not fund.
• Exchange: best for owners who want to stay invested but trade work, risk or location for something easier.

Also think about where you will live. Some owners sell a rental in Boca Raton and buy in a lower-cost market like Port St. Lucie. Others move into a former rental, which brings its own tax rules. Get advice before you do that, because the rules for converting a rental to a home are not simple.

Florida costs for retired owners of rental properties

Whatever you choose, plug real numbers into the plan. Here are the Florida costs that most often change the answer.

• Insurance: get a fresh quote, not last year's premium. Ask about wind mitigation credits.
• HOA and condo dues: read the latest budget and ask about planned special assessments.
• Property taxes: a rental does not get the homestead exemption, so the bill can rise faster than on your own home.
• Roof and AC age: both affect insurance and buyer interest. An old roof can make a policy hard to place.

The local market matters too. In August 2026, Palm Beach County condos and townhouses had 6.7 months of supply, while single-family homes had 3.5 months, per Miami Realtors. In other words, condo sellers face more competition right now. That can affect your timing if your rental is a condo.

Steps to take before you decide

1. Pull a current value for each rental. A free home value report is a good start.
2. Gather your purchase price, improvements and depreciation taken. Your tax returns hold most of it.
3. Meet with a tax advisor or CPA to estimate the tax for selling, exchanging and holding.
4. Talk to an estate planning attorney if you plan to leave the homes to heirs.
5. Ask a local agent for a rent and resale analysis, so you compare real numbers.

Frequently asked questions

Should I sell my rental properties when I retire?

Not always. If the rent covers all costs with room to spare and you can handle the work or pay a manager, keeping them can make sense. However, if repairs, insurance or tenant stress are piling up, selling or exchanging may suit you better.

How much tax will I pay when I sell a rental?

It depends on your income and your history with the property. Long-term gains are taxed at 0%, 15% or 20%. The gain from past depreciation is taxed at up to 25%. Some sellers also owe the 3.8% net investment income tax. A tax advisor can give you a real estimate.

Can a retiree still do a 1031 exchange?

Yes. Age does not matter. The rules are the same: identify the new property within 45 days and close within 180 days or by your return due date, whichever comes first. The new property must also be held for business or investment.

Is it better to leave rentals to my kids?

It can be. Heirs generally receive a basis equal to fair market value at the date of death, which can wipe out much of the built-up gain. Still, this depends on your estate plan, your cash needs and whether your heirs want to be landlords.

What if my rental is a condo with high HOA fees?

Look at the latest budget, reserves and any planned assessments. Condo supply in Palm Beach County was higher than single-family supply in August 2026. So if you plan to sell, it may help to start early and price with care.

Sources

• IRS, Topic 409: Capital gains and losses
• IRS, Topic 559: Net investment income tax
• IRS, Instructions for Form 8824, Like-kind exchanges
• IRS, Publication 551, Basis of assets
• Miami Realtors, Palm Beach County August 2026 market report

This article is general information, not legal, tax or financial advice. Tax rules change and every owner's situation is different, so talk with a CPA, tax advisor or estate planning attorney before you act.

Own rentals in Palm Beach County? Request an investor property and rental analysis, and we will show you what each home could sell for and what it could rent for, side by side. Request your analysis or check your home's value. Looking to buy an easier rental instead? Talk to a buyer's agent about lower-maintenance options.