From Primary Residence to Rental - Tax Implications?

[Jackie F.]

I know I can ask my tax accountant, but wanted to get a general feel for what I am thinking of doing.

This home was my primary residence for 3+ years then it became a rental for the past 1.5 years.

How does the capital gains tax work?  This is in case I decide to NOT use a 1031 exchange, which is still an option.  But if I simply want to cash out my profits, how much is taxable?

[Dave Toelkes]

Provided you owned the property at least two of the five years prior to sale AND occupied the property as your primary residence at least two of the five years prior to sale, all of your sale profit up to $250K per taxpayer can be excluded from capital gains taxes.   The tax on unrecaptured depreciation during the rental period is still payable and can not be excluded.  Unfortunately, any tax loss you incur on the sale of a primary residence is not deductible. 

Once you no longer meet the two of five year ownership and occupancy tests, 1031 exchange becomes an advantageous option, but probably not before.