Section 121 exclusion (how is it actually applied?)

[Nick Salemme]

I am in the process of renting my current principal residence out and buying another home for myself to live in. I will have lived in my current home for 2 years on May 26th, 2018 (my closing date was May 26, 2016), although my drivers license date/date of address change is technically June 3, 2016. I am wondering what date actually matters to the IRS for me to reach the 2 year mark, and whether it matters or not if I close on my next home prior to these dates. My plan is to rent out the unit that I have lived in for 2 years and retain the option to sell for the following 3 years (given section 121 allows you to exclude the taxes on up to 250k in gains as long as you have lived in the unit for 2 years out of the past 5 years) without having to pay tax on the gains, if I do end up deciding to sell.

If anyone who has used the section 121 exclusion can help lay out how it Is actually applied and what steps I may need to take now in order for me to keep these great tax exclusion benefits in the future, that would be very helpful. Thanks, everyone.