Park Slope, BrooklynOn a leafy block in brownstone Brooklyn, I live surrounded by empty nesters pondering the next life stage. Like homeowners in many other similar communities, we own houses that have tripled – or quadrupled – in value. The roof over our head is perhaps one of our most valuable assets. We are crunching the numbers and vacillating: To sell, or not to sell?

When a moving van pulled up recently, it alerted me to the news that one set of neighbors had cashed out. In true New York fashion, I respected their privacy – to a point. It took only a few keystrokes on the Zillow website to satisfy my curiosity: They had sold their house for a whopping $3.6 million; paid $1.1 million for it 17 years earlier; and no longer had a mortgage.

But how much of their $2.5 million profit would they pocket?

First, some tax background. Since they lived in the house for at least two of the five years before the sale, they qualify for a special break that is available to homeowners who sell their principal residence (but not vacation homes): The first $250,000 ($500,000 for married couples) of their capital gain on the sale is not subject to tax.

But that still leaves them with a taxable gain of $2 million. Let’s assume they have enough other income to put them in the highest tax bracket. Including the 3.8% net investment income tax that took effect as a part of the Affordable Care Act, they would be taxed on the $2 million gain at a 23.8% rate, and owe Uncle Sam $476,000 ($2 million times 23.8%).

As New York City residents, they would have additional state and local taxes to contend with, chiseling another $214,520 off their profit, says Barry C. Picker, a CPA with Picker & Auerbach in Brooklyn, N.Y. The total tax, of $690,520, leaves them with $1,809,480 of profit on the sale. Not counting closing costs and the Realtor’s commission (both of which are deductible), they walk away with about $2.9 million in cash.

I hope they went laughing with it all the way to the bank, because the day after they moved out, the new owners posted a construction permit on the door. Renovations were about to begin on the space our former neighbors had lovingly restored. I’m glad they were not there to witness the trucks arriving with building supplies.

Another sobering thought is what it will cost them, and others like them, to live in the next place. As newcomers to the housing market, you may find that fixed costs as a renter exceed what you previously paid to maintain your home, and you may get a lot less space for that money. Likewise, if you plan to buy (and of course this depends on where you go), get ready for a nasty case of sticker shock.

Other neighbors of mine, who don’t need the money right away, have told me that they would like to be carried out of the house feet first. By leaving their home to their kids, they can avoid much, if not all, of the capital gains tax they would have to pay if they sold it themselves. That’s because with most assets, including real estate, inheritors can “step up” their tax basis to whatever an asset was worth at the original owner’s death. This enables them to sell a highly appreciated home, with all the gain before they inherited it not counted.

For those who would rather not die or cash out, a liquid market for short-term rentals poses another option. Houses like the one my neighbors just sold are renting for about $132,000 per year, unfurnished. And though you must pay tax on that money, in the current market, the house can continue to appreciate while it throws off income that in this example is more than 3.5% of its current value. For the risk averse, that’s an attractive proposition.

Terry Baum, a broker with Warren Lewis Sotheby’s International Realty, has a client who used this strategy without even leaving the neighborhood. She rented out the house where she raised her family and downsized to a nearby co-op.

As we transition to what I refer to as our “un-retirement,” my husband and I have used sharing economy platforms (think Airbnb, HomeAway and VRBO) to rent our home, furnished, for the past two autumns and lived in France on the proceeds. High-speed internet connections have made it possible to continue my work from overseas. In between, we have played the role of property managers as we prepare our house for long-term tenants and arrange for any repairs once we return. Best of all, we’ve postponed the difficult decision about whether to sell, or not to sell. For now, we’re hedging our bets.

Deborah L. Jacobs, a lawyer and journalist, is the author of Four Seasons in a Day: Travel, Transitions and Letting Go of the Place We Call Home and Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide. Follow her on Twitter at @djworking and join her on Facebook here. You can subscribe to future blog posts by using the sign-up box on her website’s homepage.