Reply To: rental house

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#4567
kaneohe
Participant

Sounds like you would qualify under the 2/5 rule if you sold within a reasonable time period. However note that the depreciation you took
(or should have taken) does not qualify to be excluded as part of the 250K
(or 500K if MFJ) gain.
https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/property-basis-sale-of-home-etc-5

“For rental property, the law has additional limits on the amount you may exclude. You may not exclude the part of your gain equal to any depreciation deduction allowed or allowable for periods after May 6, 1997.”