Capital gains tax selling rental beyond 2 out of 5 years rule

[John Emmerich]

Hello! Hoping to get some information regarding selling a rental that was formally my primary residence. For context for the question here is some info:

• - Purchased the house in June 2015 for $199K (tax value home $126K and land $40K) and lived in it until 2019
• - Started renting it out in June 2019, worth approximately $300K (tax value home $152K and land $56K)
• - Have written off about $8500 in deprecation capture in the past 2 years
• - Current price of the home is now $340K (tax value home $190 and land $58K)

My understanding is that if I have lived in the home as my primary residence for at least 2 out of the 5 years and then sell, I would pay no capital gains except 25% of the recapture taxes I wrote off. If decided to rent it out for another 2 years and lose that exemption how are my capital gains calculated…..is it the difference from the new sale price of the home and the “original sale price” we purchased it for or from the time is was put “into service value” as a rental?

Ex. est 2023 value of $360K - 2015 value of $195k = $165k

Ex. est 2023 value of $360k - 2019 value of $300k = $60K

It is cash flowing really well but if the first example is the tax bill, I might be motivated to sell it and capture my gains. If anybody has any experience or info with this your thoughts are very much appreciated!!