A sale leaseback is a sale, so start with the IRS rules for selling your main home. If you qualify under current IRS rules (Topic 701, checked November 2026), you can exclude up to $250,000 of gain from your income, or up to $500,000 on a joint return. Gain above that, or a partial exclusion, may be taxable.
Is a sale leaseback taxed like any home sale?
In a sale leaseback you sell your home and stay in it as a renter, and you receive your equity, minus fees and costs, as cash at closing. The sale is what the tax rules look at.
IRS Publication 523, Selling Your Home, has the rules and worksheets for the sale of a main home. It has no section on sale leasebacks, so treat it as the starting point and confirm your case with a tax professional.
The home sale exclusion in plain words
Under current IRS rules (Topic 701, checked November 2026), you can exclude up to $250,000 of gain from the sale of your main home, or up to $500,000 if you file a joint return with your spouse.
To qualify, you generally have to pass two tests. Ownership: you owned the home for at least 24 months of the 5 years before the sale. Use: you lived in it as your home for at least 24 months of those 5 years. The two periods do not have to be the same, but both have to fall inside the 5 years ending on the date of the sale.
Your gain is the amount realized minus your adjusted basis. The amount realized is the selling price minus your selling expenses. If your gain is more than the exclusion, or you qualify only for a partial exclusion, some of it may be taxable.
One more rule: if you receive Form 1099-S, the IRS says to report the sale even if all the gain is excluded.
What changes when you stay as a renter
Because the tests look back from the date of the sale, renting afterward shouldn't change them for this sale. Confirm with a tax professional.
After closing, you are a tenant. You pay rent under the lease, and the buyer owns the house. Ask a tax professional how that affects anything else on your return.
Questions for a tax pro
- Do I pass the ownership and use tests on the date of the sale?
- Which of my closing costs count as selling expenses?
- What is my adjusted basis, after improvements?
- Will I receive Form 1099-S, and how do I report the sale?
- Is any of my gain above the exclusion?
Then compare the leaseback companies on fees, leases and coverage at leaseback.com/compare, or run your numbers in the leaseback calculator.
This post is general information, not tax advice. Talk to a tax professional about your situation.
Frequently asked questions
Do I pay taxes when I sell my house in a sale leaseback? It depends. A sale leaseback is a sale, and under current IRS rules (checked November 2026) you can exclude up to $250,000 of gain on your main home, or up to $500,000 on a joint return, if you pass the ownership and use tests. Gain above that may be taxable.
What are the ownership and use tests? You generally must have owned the home for at least 24 months and lived in it as your home for at least 24 months, both within the 5 years ending on the date of the sale.
Does renting the home back after the sale change the tests? Because the tests look back from the date of the sale, renting afterward shouldn't change them for this sale. Confirm with a tax professional.
Sources
- S1: Leaseback.com home page, How it works, steps 05 and 06, and the home FAQ (live Nov 10, 2026): https://www.leaseback.com/
- S2: IRS Topic no. 701, Sale of your home (fetched Nov 10, 2026): https://www.irs.gov/taxtopics/tc701
- S3: IRS Publication 523, Selling Your Home (fetched Nov 10, 2026; text search found no "leaseback" or "lease back"): https://www.irs.gov/publications/p523